chapter 14 intermediate accounting
detachable stock warrants
A warrant (option to buy common stock at a fixed price) that can be "detached" from the related security (a bond) and traded as a separate security for a specified period of time.
debenture bonds
Bonds that are unsecured (i.e., not backed by any collateral such as equipment). only secured by the "full faith and credit"
Convertible bonds
Bonds that can be converted into common stock at the bondholder's option. they have features of both debt and equity
troubled debt restructuring
Occurs when a creditor grants to the debtor, due to the debtor's financial difficulties, concessions that it would not otherwise consider. A troubled-debt restructuring involves either (1) settlement of debt at less than its carrying amount, or (2) continuation of debt with a modification of terms.
convertible bonds
are retired as a consequence of bondholders choosing to convert them into shares of stock
Sinking fund debentures
bonds that must be redeemed on a prespecified year-by-year basis; administered by a trustee who repurchases bonds in the open market.
callable bonds
bonds that the issuing company can redeem (buy back) at a stated dollar amount prior to maturity. the callable amount must be specified
Bond indenture
describes the specific promises made to bondholders
subordinated debenture
not entitled to receive any liquidation payments until the claims of other specified debt issues are satisfied
serial bonds
retired in installments during all part of the life of the issue
Substance over form
the economic essence of a transaction should prevail over its outward appearance
effective interest method
the effective market rate of interest multiplied by the outstanding balance
coupon bonds (bearer bonds)
to collect interest from a coupon bond, the holder actually clipped an attached coupon and redeemed it in accordance with instructions in the indenture.
early extinguishment of debt
when debt of any type is retired prior to its scheduled maturity date
