Intermediate Accounting Debt Financing参考.ppt

Debt Financing Definition of Liabilities The FASB defined liabilities as “probable future sacrifices of economic benefits arising from present obligations to a particular entity to transfer assets or provide services to other entities in the future as a result of past transactions or events.” Measurement of Liabilities For measurement purposes, liabilities can be divided into three categories: Short-Term Operating Liabilities Present Value of Long-Term Debt A mortgage is a loan backed by an asset that serves as collateral for the loan. On January 21, 2011, Crystal Michae purchases a house for $250,000 and makes a down payment of $50,000. The remainder is financed with a 12%, 30-year mortgage. Financing with Bonds Issuance of Bonds Straight-Line Method Bond Refinancing Accounting for Troubled Debt Restructuring A significant accounting problem is created when economic conditions make it difficult for an issuer of long-term debt to make the payments under the terms of the debt instrument. The revision of debt terms to avoid bankruptcy proceedings or foreclosure on the debt is referred to as troubled debt restructuring. Analyzing a Firm’s Debt Position The term leverage refers to the relationship between a firm’s debt and assets or its debt and stockholders’ equity. A common measure of a firm’s leverage is the debt-to-equity ratio. Total Liabilities Total Stockholders’ Equity Debt-to-Equity Ratio = Analyzing a Firm’s Debt Position Another measure of a company’s performance relating to debt is the number of times interest is earned. Times interest earned is calculated using the following formula: Income Before Taxes + Interest Expense Interest Expense Times Interest Earned = Transfer of Assets in Full Settlement (Asset Swap) A debtor that transfers assets, such as real estate or inventories, to a creditor to fully settle a payable will recognize two types of gains or losses: A gain or loss on disposal of the asset A gain arising from the concession gran