I'm having a hard time thinking these accounting entries through. Company has a convertible note that gets amortized. What entry am I missing here because the BS doesn't balance with what I have below??
with amort expense.....
P&L NI - down
CF NI - down Amort - add back cash impact is zero
BS Cash - flat Convert debt - down Retained Earnings - down
| +195 | Americas M&A League Table Q2 Updated | 77 | 15h |
| +142 | New Article: Dramatic Slide as UBS #22 (US) & New Leadership Desperately Needed | 37 | 4h |
| +126 | Restructuring: Anti-climactic Experience | 34 | 14h |
| +94 | IB Net Worth / Savings Check | 43 | 16h |
| +79 | Woman who emptied Knicks trashcan on street then stole it was DEI exec, worked at JPMorgan Chase | 18 | 3h |
| +78 | A COMPLETE GUIDE TO SUMMER INTERNSHIP RECRUITING | 12 | 3d |
| +54 | Stop sleeping on UBS - it’s pretty good | 15 | 1h |
| +48 | 2026 VAULT PRESTIGE RANKINGS | 29 | 21m |
| +39 | Investment Banking is Hard | 17 | 2d |
| +32 | AI + Financial Modelling | 11 | 3h |
Career Resources
Get instant access to lessons taught by experienced private equity pros and bulge bracket investment bankers including financial statement modeling, DCF, M&A, LBO, Comps and Excel Modeling.
Amortization refers to two different things that I think you might be confusing (1) the paying down of debt (principle) and (2) amortization that relates to asset value... I think you're talking about debt pay down which in this case your 'entries' wouldn't make sense as it would only impact the BS and the SCF primarily with maybe a reduction in interest expense impacting the P&L
Generally, the part that gets amortized relative to debt is the discount or premium, depending on the difference between face value and the cash collected. This difference (discount or premium) arises when market rates differ from the rate on the note. You have 3 scenarios:
1) Market rate = Note Payable rate; no discount or premium 2) Market rate Note Payable rate; premium, because note pays a higher rate than current market 3) Market rate > Note Payable rate; discount, because note pays a lower rate than current market
In scenario 2 and 3, GAAP says you have to amortize the discount or premium over the number of repayments.
Here is a detailed explanation of the entries related to notes payable. Note the difference between amortizing using straight line vs effective interest method. I don't think the fact that they are convertible bonds affects the amortization of discount or premium. The convertible piece is only relevant to your question in the event that conversion takes place (that's a unique set of entries that aren't asked for here).
http://www.cliffsnotes.com/study_guide/Bonds-Payable.topicArticleId-212…
Nesciunt velit et modi est. Vel officiis expedita aspernatur animi magnam. Officiis ipsum velit non ut quia inventore. Est non expedita quaerat beatae quis recusandae.
Id aut ut quia voluptatem. Et sit aut eum. Nulla ut aut earum perspiciatis libero.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...