Intermediate Accounting: Long-Term Financial Liabilities

Intermediate
Accounting
13th Canadian Edition, Volume 2
Kieso ● Weygandt ● Warfield ● Wiecek ● McConomy
Chapter 14
Long-Term Financial Liabilities

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Chapter 14: Long-Term Financial
Liabilities
After studying this chapter, you should be able to:
1. Understand the nature of long-term debt financing
arrangements.
2. Understand how long-term debt is measured and accounted for.
3. Understand when long-term debt is recognized and
derecognized, including how to account for troubled debt
restructurings.
4. Explain how long-term debt is presented, disclosed, and
analyzed.
5. Identify differences in accounting between IFRS and ASPE, and
what changes are expected in the near future.
Copyright ©2022 John Wiley & Sons, Canada, Ltd. 2

Long-Term Debt
• Consists of obligations that are not payable within a year
or the operating cycle of the business, whichever is
longer
• Will probably require sacrifices of economic benefits
• Long-term debt and long-term liabilities have similar
meaning and are often used interchangeably
• Examples: bonds payable, long-term notes payable,
mortgages payable, pension and lease liabilities
LO 1 Copyright ©2022 John Wiley & Sons, Canada, Ltd. 3

Legal Contracts
• Financing arrangements generally documented in a legal
contract
• Determine the rights and obligations of the lender and
borrower
• State the terms of the arrangement
o Interest rate
o Due date or dates
o Call provisions
o Property pledged as security
o Sinking fund requirements

Restrictive Covenants
• Contracts may include restrictive covenants
• Terms and conditions that are meant to limit activities
• Meant to protect lenders and borrowers
• Examples
o Working capital restrictions
o Dividend restrictions
o Limitations on additional debt (most common)

Bonds
• Most common type of long-term debt
• Main purpose: borrowing for the long term when the
capital required is too large for one lender
• Bonds issued in small denominations ($100, $1,000, or
$10,000) and usually have a paper certificate
• Created by a bond indenture (contract)
• Represents a promise to pay
o A sum of money at a designated maturity date
o Periodic interest at a specified rate on the maturity
amount (face value)—usually made semi-annually

Sale of Bonds
• Can be sold in different ways
• Entire issue sold to an investment banker
o Firm commitment underwriting: underwriter agrees to
sell the entire issue by guaranteeing a certain sum to the
corporation (also known as a “bought deal”)
o Best efforts underwriting: the underwriter makes their
best effort to sell as much as possible of a securities
offering, for a commission
• Private placement: issuing company sells to a large
institution without the aid of an underwriter

Long-Term Notes
• Similar in substance to bonds
o Have fixed maturity dates
o Carry a stated or implicit interest rate
• Legal form of a note is different from a bond
• But economic substance is the same—both liabilities
• Receive substantially the same treatment from an
accounting perspective

Types of Long-Term Debt
• Each type of instrument has specific contractual features
that manage risk for the company and/or the holder
• Each feature changes the riskiness and desirability of the
instruments and therefore affects the pricing of the
instrument
• Many different types of bonds
• Registered bonds—are issued in the owner’s name; to
sell, the current certificate must be surrendered, and a
new certificate can then be issued

More Types of Long-Term Debt
• Bearer (coupon) bonds—not recorded in the owner’s
name; can be easily transferred to a new owner
• Secured debt—backed by a pledge of some sort of
collateral
o Mortgage bond or notes: secured by a claim on real estate
o Collateral trust bonds or notes: secured by shares and
bonds of other corporations
• Unsecured debt—not backed by collateral
o Debenture bonds: backed by general creditworthiness and
reputation of issuer

Even More Types of Long-Term Debt
• Term bonds or notes—mature on a single date
• Serial bonds or notes—mature in instalments
o Used by schools, municipalities, governments
• Perpetual bonds or notes—unusually long terms
o 100 years or more; or no maturity date
o Also called century or millennium bonds
• Income bonds—pay no interest unless issuing company
is profitable
• Revenue bonds—interest is paid from a specific revenue
source

And Even More Types of Long-Term
Debt
• Deep discount bonds or notes—pay little or no interest;
but sell at a large discount
o Also called zero-interest debentures, bonds, notes
• Commodity-backed debt—redeemable in commodities
o Also called asset-linked debt
• Callable bonds and notes—gives the issuer the right to
call and retire the debt before maturity
• Convertible debt—allows the holder or issuer to convert
debt into other securities (e.g., shares)

Credit Ratings
• Most corporate bond issues are assigned a credit rating
o An assessment of the company’s ability to pay the amounts
owing when they are due
• Credit quality is constantly monitored—rating may change
over the term of the bond
o AAA—highest rating; lowest default rates
o Below BBB—below investment grade; high default rate
• Investment grade—high quality securities; only certain
securities qualify

Defeasance
• A company may wish to pay off its debt prior to the
maturity date
o Often not permitted because of legal reasons
o Early payment penalties may be prohibitive
• Defeasance is setting aside money in a trust, and having
the trust repay the principal and interest
• With legal defeasance:
o Creditor agrees to accept payment from trust
o Creditor gives up its claim to the company

Companies with Debt Financing
• General business model involves financing to invest in
assets that are used to produce income
• Financing is generally available through 3 sources:
o Borrowing: must be repaid; increases liquidity and
solvency risk
o Issuing equity (shares): repayment is not required but may
result in dilution of ownership
o Using internally generated funds
• Leverage—using other people’s money to maximize
returns to shareholders
• Capital-intensive industries have greater borrowing
power because of their underlying tangible assets
Measurement: Bonds and Notes
Issued at Par
• When issued, bonds and notes are valued at the present
value of their future principal and interest cashflows
o Generally, represents fair value
o Plus, any directly attributable issue costs (unless
subsequently measured at fair value)
PiP 14.1 A company issues 10-year bonds with a par value of

$800,000 on Jan 1, 2023. Interest is at 10% payable semi-
annually on Jan 1 and Jul 1. Bonds are issued at par. Record the
journal entries for 2023.

Journal Entries for Bonds and Notes
Issued at Par
Jan 1, 2023: If a bond is
issued at par, the cash
received is equal to the
face value of the bond
First interest payment

on July 1: $800,000 x
10% x 6/12 = $40,000
Interest will be paid on

Jan 1, 2024, it has
accrued since Jul 1., so
at year-end record as a
payable

Measurement: Notes Issued at Par
• The accounting for notes issued at par is the same as for
bonds issued at par
PiP 14.2 A company issues a 3-year note for $10,000. Stated rate
and effective rate are both 10%.
When the stated rate

and the effective rate
are the same, the
present value of the As the face value and the present
note is the same as the value of the note are the same, no
face value premium or discount is recognized

Measurement: Discounts and
Premiums
• Some definitions:
o Stated, coupon, nominal rate: the rate printed on the
certificate; set by the bond issuer
o Face value, par value: the principal amount or the
maturity value
o Discount: bonds sell for less than face value
o Premium: bonds sell for more than face value
o Effective yield: the market rate; the interest rate that is
actually earned, taking into consideration the discount or
premium

Discounts and Premiums
• A bond is valued at the present value of future cash flows
(interest and principal)
• Inverse relationship between the market interest rate and
the bond price
o When interest rates increase, the bond price decreases,
and it sells at a discount; market rate (effective yield) is
higher than the stated rate
o When interest rate decrease, the bond price increases,
and it sells at a premium; market rate (effective yield) is
lower than the stated rate

Bonds Issued at a Discount
• Bonds will sell below face value when investors demand
a higher rate of interest than the stated rate
• Because they cannot change the stated rate, the amount
of the investment is lowered
• Same treatment for notes payable
PiP 14.3 $100,000 in bonds due in 5 years with an interest rate

(stated rate) of 9%. Interest is paid at the year-end. Market rate
is 11% at date of issuance. What is the present value?

Bonds Issued at a Discount—Selling
Price
• Determine the present value of the principal and
interest, using the market rate (11%), for five periods
By paying only $92,608 at the date The price at which bonds

of issue, investors will realize an sell is typically stated as a
effective yield of 11% over the 5- percentage of their par
year term of the bond value—these bonds sold
at 92.6
Bonds Issued at a Discount—Straight-
line Amortization
• Bonds are subsequently measured at amortized cost
• Interest is adjusted for any premium or discount to bring
the rate to the effective interest rate
• ASPE also allows the straight-line method to be used for
amortization
PiP 14.4 Company issues 10-year bonds with a par value of

$800,000 on Jan 1, 2023. Interest is at 10% payable annually on
Dec 31. Bonds are issued at 97.

Straight-Line Amortization of Bond
Discount
• First recognize the sale with the discount Under the
straight-line
method, the
amount
amortized is the
• On Dec 31, recognize the amortization same each year:
($24,000/10)
The $24,000 discount is recognized At the end of the first year, the
as interest expense, and a portion is unamortized discount is $21,600
added to the interest payment each
which makes the carrying amount of
year to determine total interest
expense the bonds payable $778,400
Bonds Issued at a Premium—
Straight-line Amortization
• When bonds sell and the market rate is lower than the
nominal or stated rate.
• The selling price is calculated the same as with
discounts: present value of the principal and interest
over the term of the bond using the market rate

$800,000 on Jan 1, 2023. Interest is at 10% payable annually on
Dec 31. Bonds are issued at 103.

Straight-Line Amortization of a Bond
Premium
• Recognize the sale with the premium
Bonds are sold with a
$24,000 premium—
means market rate is
most likely to be less
• On Dec 31, recognize amortization than the stated rate
By the end of the 10

years (maturity date of
the bond) the amortized
Using the straight-line method to premium will have
calculate premium amortization, $2,400 reduced Bonds Payable
would be credited to reduce annual to $800,000
interest expense
Bonds Issued Between Interest Dates
• Buyers will pay the seller the interest that has accrued
from the last interest date to the issue date
• Payment, in advance, for the portion of the payment
they will receive on the next payment date, but will not
have earned

annually on Jan 1 and Jul 1.

Journal Entry for Bonds Issued Between
Interest Dates
Purchaser would pay:

Principal--$800,000 (par)
Interest Expense (or Payable): $800,000 x 10% x 2/12 =
$13,333
Investor will net $26,667
On July 1, the interest payment ($40,000 received on Jul 1 less
is for six months: $800,000 x $13,333 paid upfront) which is
10% x 6/12 = $40,000 the equivalent of 4 months of
interest (Mar 1 to Jun 30)

Journal Entry for Bonds Issued at a
Premium Between Interest Dates
annually on Jan 1 and Jul 1. Now assume the bonds are issued
on March 1 at 102.
• The price of the bonds will be ($800,000 x 1.02) plus interest

for Jan and Feb ($800,000 x 10% x 2/12) = $816,000 + $13,333
The premium would be
amortized from the date
of the sale (Mar 1) not
the date of the bonds
(Jan 1)

Effective-Interest Method with a
Discount
• A common method for amortizing a discount or
premium
• Required for amortization under IFRS; accounting policy
choice under ASPE
• Under this method interest expense is
o (carrying value at the beginning of the period x effective
interest rate)
o Amortization = Interest expense – interest paid
PiP 14.7 $100,000 of 8% bonds issued on Jan 1, 2023, that are due in five
years. Interest is due on Jan 1 and Jul 1. To achieve an effective interest
rate of 10%, the bonds are sold at a discount for $92,278.
The Effective-Interest Method with a
Bond Discount—Recording Interest
• Journal entry to
record first interest
payment
• After the first payment • After the second payment

Bond Discount—Recognizing Issuance
Proceeds from
the sale—PV of
principal and
interest
Issuance of the bond

at a discount of
$7,722:
($100,000 − $92,278)

Schedule of Bond Discount
Amortization
• Simplified process if using an amortization table
Price of
the bond
Carrying
amount of
the bond
after Jul 1
First interest charge: Jul 1
Interest paid: $92,278 x 10% x ½ year Carrying
$100,000 x 8% x ½ year amount of
Second interest charge: Jan 1 (accrued on the bond
Dec 31) $92,892 x 10% x ½ year after Dec 31

Bond Premium—Recognizing Issuance
PiP 14.8 Assume the
bond was sold for
$108,530 with an
effective interest rate
of 6%
Issuance of the bond at

a premium of $8,530:
($108,530 − $100,000)

Bond Premium—Recording Interest
• Journal entry to
record first interest
payment
• After the first payment • After the second payment

Summary of Effective Interest Method
with a Premium
• Similar to discounts; except amortization amount will be
subtracted from the carrying value of the bond
• Amortization of the premium would reduce the expense
each month
• Carrying amount of the bond would decrease by the
amount of the amortization (Debit Bonds Payable)
• Under effective interest method, amortization of the
premium (or discount) results in a constant interest rate;
straight-line method produces a constant amount of
interest each month
Effective Interest Method: Year-end
between Interest Dates
• Interest and amortization would be prorated by the
appropriate number of months
Assume year-end was at the end of February 2023
Interest Expense (Jan to June) = $4,000
Amortization of premium (Jan to June) = $744

Marketable Securities Issued with Non-
market Rate of Interest
PiP 14.10 A $10,000, 3-year, zero-interest-bearing note was
issued. The cash proceeds were $7,721.80 based on an implicit
rate of 9%. The market rate of a similar instrument is also 9%.
• The note is recorded at the cash proceeds

• The discount would be amortized and charged to interest
expense (using the effective interest method)
• Discount amortization amount for the first year is
$7,721.80 x 9% = $695
• The total amount of discount ($2,278) represents the
interest to be incurred over the three years
Notes Issued for Cash: Non-Market
Rates of Interest (Non-Marketable
Instruments)
• Cash consideration might not be equal to fair value of the
loan; there might be additional value being transferred
• The extra benefit would be accounted for separately
PiP 14.11 To help finance the construction of a building, the
government provides $100,000 in cash, in exchange for a
$100,000 five-year, zero-interest-bearing note at face value
when the market rate is 10%.
The fair value of the note is = PV of $100,000 for 5 years at 10% =
$62,092 and the concession is the difference between the face
amount and the present value ($37,908)
Accounting for a Non-Marketable
Instrument at a Non-market Rate of
Interest
• The government is forgiving the interest the company
would normally be charged
• Company is getting a loan and a government grant
The value of the loan is the
present value of the cash
received using the current
market rate of interest
(10%)
Interest component. Under government grant Amortized to net income

accounting, can be booked to the related asset; through building
will be amortized to interest expense depreciation

Notes Issued for Property, Goods, or
Services: Non-market Rates of Interest
(Non-marketable Instruments)
• If the issued debt is a marketable security, the value of
the transaction would be equal to fair value of the
marketable security
• If the issued debt is not a marketable security:
o May try to value debt by discounting cash flows at market
rate of interest, or
o May use the fair value of the property, goods, services

Fair Value Option
• Long-term debt is generally measured at amortized cost
however it can also be measured at fair value
o IFRS requires the fair value option only if it results in more
relevant information
o IFRS requires that non-performance risk be included in the
fair value measurement
o Changes in fair value due to changes in credit risk are
reported in other comprehensive income
o ASPE allows the fair value option for all financial
instruments; changes in fair value are recognized in net
income

Use of the Fair Value Option in Valuing
a Long-Term Liability
PiP 14.13 A company has $100,000 in bonds outstanding. At the
end of the year, the company’s credit risk has increased, and the
fair value of the debt is now $95,000. The company had chosen
the fair value option for this debt.
Under ASPE all
changes in fair value
are recognized in net
income with the fair
value option
IFRS requires subsequent changes in fair value due to

changes in credit risk to be booked through other
comprehensive income

Extinguishment of Debt
• Extinguishment of debt is recorded when:
o The debtor pays the creditor, or
o The debtor is legally released from paying the creditor
(due to cancellation, expiry etc.)
• When debt is extinguished, it is derecognized
• If debt is held to maturity, any premium or discount will
be fully amortized; carrying value = maturity (face)
value; no gain or loss
• Also, face (maturity) value = market value at the time;
no gain or loss

Repayment before Maturity Date
• When debt is paid out prior to maturity, the amount
paid is called the reacquisition price
• On any date, the carrying amount of the bond = the
maturity value plus or minus the unamortized discount
or premium, and issuance costs
• If carrying amount > reacquisition price, gain from
extinguishment; If reacquisition price > carrying amount,
loss from extinguishment
• At the time of reacquisition all outstanding premiums,
discounts, and issue costs are amortized to the date of
reacquisition

Repayment of Bond before Maturity
PiP 14.14 On Jan 1, 2023, a company issued bonds with a par value
of $800,000 at 97 (which is net of issue costs) due in 20 years.
Eight years later the entire issue is called at 101 and cancelled.
The straight-line method is used.
• Determine gain or loss on reacquisition of the bond
Annual amortization up to now:

$800,000 – ($800,000 x 0.97) divided by 20 = $1,200/year
12 years left at $1,200 = $14,400 unamortized discount

Exchange of Debt Instruments
• Replacement of an existing issuance with a new one is
called refunding
• Exchange of debt instruments that have substantially
different terms: extinguishment of old; issuance of new
• Troubled debt restructuring: occurs when, for economic
or legal reasons related to the debtor’s financial
difficulties, a creditor grants a concession it would not
normally offer
• Two types: Settlement of debt at < carrying amount;
continuation of debt, with terms modification
• If new debt is substantially the same as the old, it is
considered to be a continuation of the old debt
Settlement of Debt
• Debt resettlement: old debt and all related discount,
premium and issuance costs are derecognized
• Usually results in a gain, because creditors make
favourable concessions
• Means of settlement
o Transfer non-cash assets—the creditor takes the
underlying security as payment (loan foreclosure)
o Make a share transfer
o Issue new debt to another creditor; use proceeds to
repay existing debt

Settlement of Debt—Asset Transfer
(Creditor)
PiP 14.15 City Bank lends $20 million to Union Trust and accepts a
fair value $16 million building in settlement. Building recorded at
$21 million net of accumulated depreciation of $5 million. Prepare
the journal entry for City Bank.
Realistically, a loss should likely have been

recognized when the bank first determined that
the loan was impaired. This would usually be
done before a loan is restructured or settled.

Settlement of Debt—Asset Transfer
(Debtor)
PiP 14.15 City Bank lends $20 million to Union Trust and accepts a
fair value $16 million building in settlement. Building has a
carrying amount of $21 million, net of accumulated depreciation
of $5 million. Prepare the journal entry for Union Trust.
Union has a $5
million loss on
disposal of building—
difference between
$21 million book
value and the $16
million fair value
Union has a $4 million gain on restructuring of debt— All accounts for the
difference between the $20 million note and the $16 building and the note
million fair value of the building are derecognized

Settlement of Debt—Share Transfer
PiP 14.16 City Bank accepts 320,000 common shares of Union
Trust, with a market value of $16 million in full settlement of the
$20 million loan. The bank had previously recognized a loss on
impairment of $4 million. City bank treats the investment as FV-NI.

Settlement of Debt—Substantial
Modifications
• In some cases a debtor may request modifications of the
original contract or agreement
• Usually arise from temporary cash flow problems
• Examples of modifications
o Reduction of the stated interest
o Extension of the maturity date
o Reduction of debt’s face amount
o Reduction or deferral of any accrued interest
o Change in currency

Accounting Treatment of Substantial
Modifications
• If there are substantial modifications, the transaction is
treated like a settlement
• To be consider substantial, the modifications must meet
one of the following criteria
o Discounted PV of the new terms (with original effective
interest rate) is at least 10% different from the discounted
PV of the remaining cash flows under the old debt
o There is a change in the creditor and the original debt is
legally discharged

Settlement of Debt with Substantial
Modifications
PiP 14.17 On Dec 31, 2023, National Bank restructures a $10.5
million loan receivable with Resorts Corp. by doing the following:
(1) reduces obligation to $9 million; (2) extends the maturity
date 4 years—2023 to 2027; (3) reduces the interest rate from
12% to 8%. Market rate is currently 9%.
Old debt: $10,500,000 (it is currently due)
New debt: PV of $9,000,000 at 12% for 4 years + PV of interest annuity,
($9,000,000 x 8%) at 12% for 4 years = $7,906,572 (creditor uses
historical rate of interest for PV for consistency)
New debt’s value differs by more than 10% of the old value, so
this is a substantial modification. The renegotiation is considered
a settlement.
Settlement of Debt—Substantial
Modifications: Journal Entries
The debtor
records a gain on
the restructuring
*PV of the new debt, where debtor uses the market interest rate:
PV of $9,000,000 at 9% for 4 yrs. + PV of an annuity $720,000 at 9% for 4 yrs.
The creditor
records a loss on
the restructuring

Accounting Treatment of Non-
Substantial Modifications of Terms
• When there is no substantial modification
o Old debt continues with new terms
o Measurement under ASPE: new effective interest rate is
imputed by equating the carrying amount of the original
debt with the present value of the revised cash flows
o Under IFRS: debt is remeasured by discounting the new
cash flows at the original effective interest rate

Non-substantial Modification of
Lending Arrangement
PiP 14.18 On Dec 31, 2023, National Bank restructures a $10.5
million loan receivable with Resorts Corp. by doing the following:
(1) reduces obligation to $10 million; (2) extends the maturity date
4 years—2023 to 2027; (3) reduces the interest rate from 12% to
11%. Market rate is currently 9%.
Old debt: $10,500,000 (it is currently due)

New debt: PV of $10,000,000 at 12% for 4 years + PV of interest annuity,
($10,000,000 x 11%) at 12% for 4 years = $9,696,285
New debt’s value differs by less than 10% of the old value, so this
is not considered a substantial modification.

Accounting by Creditor for Non-
substantial Modification--ASPE
• Under ASPE, debt remains at $10.5 million with no gain
or loss; no entry required
o Debtor calculates a new effective interest rate by relating
$10.5 million to future cash flows; rate is used to
determine interest expense and reduction of the carrying
amount

Accounting by Creditor for Non-
substantial Modification--IFRS
• Under IFRS, a journal entry is recorded to reduce Notes
Payable to new debt value ($10,500,000 to $9,696,285)
and recognize gain
o Interest expense uses the original rate of 12% and is
calculated on the new debt value, $9,696,285
o The new carrying value is increased over the 4 years until
it reaches $10 million at maturity

Accounting for Early Retirements and
Modification of Debt

Defeasance Revisited
• Legal defeasance
o Creditor looks to the trust for repayment
o Creditor no longer has claim on company
o Treated like an extinguishment; liability is derecognized
• In-substance defeasance
o Company does not inform creditor
o Creditor does not release company from primary
obligation to settle
o Original agreement is still in form; no derecognition

Off-Balance Sheet Financing
• Attempt to borrow funds in a way that the obligations
are not recognized on the statement of financial position
• Some examples
o Non-consolidated entries—parent does not report the
entity’s assets and liabilities
o Special purpose entity (SPE) or variable interest entity
(VIE): companies set up to buy assets, take on risk or
isolate certain assets from other company’s assets
o Operating leases (ASPE only)

Presentation of Long-term Debt
• Reporting of long-term debt is controversial (for
example, the definition of a liability and recognition
criteria in conceptual framework are not precise)
• Long-term debt that matures within one year is current
• Debt to be refinanced is current, depending on timing
• If more relevant to readers, present assets and liabilities
in order of liquidity
• Financial instruments becoming more complex; line
between equity and debt is becoming more blurred

Disclosures for Long-term Debt
• Disclosure requirements are significant
o For IFRS, look to IFRS 7
o For ASPE, look to Section 3856
• Briefly, note disclosures should include
o Nature of the liability, maturity dates, interest rates, call
provisions, conversion privileges
o Restrictions imposed by creditors
o Assets designated or pledged as security
o Fair value of the long-term debt
o Future payments for sinking fund requirements and
maturity amounts of long-term debt (for next 5 years)
o Risks related to long-term debt
Analytics
• Long-term creditors and shareholders are interested in a
company’s long-term solvency
Debt to Asset Ratio:

measures the percentage of
total assets provided by
creditors
Times Interest Earned Ratio-- indicates a company’s ability to

meet interest payments as they come due

IFRS/ASPE Comparison
• IFRS and ASPE are largely converged as they relate to
long-term debt
• Small differences relate to whether the debt is presented
as current or non-current and to measurement
• Refer to Illustration 14.6 for a more detailed comparison

Looking Ahead
• The IASB has been working on a project entitled
Financial Instruments with the Characteristics of Equity,
that will affect how debt and equity instruments are
classified and presented on the statement of financial
position
• The next step is expected to be a Discussion Paper after
initial discussions have been completed

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PiP 14.1 A company issues 10-year bonds with a par value of

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First interest payment

Interest will be paid on

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When the stated rate

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PiP 14.3 $100,000 in bonds due in 5 years with an interest rate

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By paying only $92,608 at the date The price at which bonds

PiP 14.4 Company issues 10-year bonds with a par value of

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PiP 14.5 Company issues 10-year bonds with a par value of

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By the end of the 10

PiP 14.6 Company issues 10-year bonds with a par value of

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Purchaser would pay:

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• The price of the bonds will be ($800,000 x 1.02) plus interest

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Issuance of the bond

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Issuance of the bond at

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• After the first payment • After the second payment

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• The note is recorded at the cash proceeds

Interest component. Under government grant Amortized to net income

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IFRS requires subsequent changes in fair value due to

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• Determine gain or loss on reacquisition of the bond

Annual amortization up to now:

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Realistically, a loss should likely have been

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