Why convertible corporate bonds contain a liability component and an equity component

Because of convertible bonds.

It is a bond in which the bondholder can convert the bond into the company's ordinary ** according to the agreement at the time of issuance. Then, when issuing such bonds, the components of liabilities and equity should be recognized.

If the bondholder does not want to convert, they can continue to hold the bond until the repayment period expires to receive the principal and interest, or liquidate it in the liquid market**.

If the holder is optimistic about the potential of the bond issuer to increase its value, he or she can exercise the right to convert the bond into ** according to the predetermined conversion after the grace period, and the bond issuer shall not refuse.

1. The liability component and equity component of convertible corporate bonds can be understood in this way: debt component - borrowed money (to be repaid), equity component - partnership business (hanging together), and the equity component of convertible corporate bonds can be converted to ** at a certain point in time. 2. The convertible corporate bonds issued by the enterprise shall be split into the liability component and equity component at the time of initial recognition, and the liability component shall be recognized as bonds payable and the equity component shall be recognized as capital reserve.

When the spin-off is carried out, the initial recognition amount of the liability component shall be determined by discounting the future cash flows of the liability component, and then the initial recognition amount of the equity component shall be determined according to the amount after deducting the initial recognition amount of the liability component from the total amount of issuance**. The transaction costs incurred in the issuance of convertible corporate bonds shall be apportioned between the liability components and the equity components according to their respective relative fair valuesDo me a favor, please.

Calculated according to the formula for calculating the composition of the liabilities of our treasury bonds:

The fair value of the liability component is $200,000).

Convertible debentures are hybrid instruments that contain both liability and equity components. At the time of initial recognition, the equity component and the liability component need to be treated separately

First, the issuance cost is not considered for the time being

1. Calculate the value of the liability component: the fair value of the liability component The present value of the future cash flow of the bond.

Second, the allocation of issuance costs:

The issuance costs are allocated between the liability and equity components in proportion to their respective fair values

Amount of Liability Component Allocation Issuance Costs Fair Value of Liability Component (Fair Value of Liability Component Fair Value of Equity Component).

Ridge Expansion Rental Exhibition Information:

Trading method: Convertible bonds are traded on T+0, and their entrustment, trading, custody, transfer custody, ** disclosure, and trading time are handled with reference to A shares. Trading of convertible bonds will be terminated 10 trading days before the end of the conversion period, and the trading will be announced one week before the termination.

It can be transferred to escrow, and Sakura rents trillions with reference to the A-share rules.

Transaction costs: **: Investors should pay commissions to brokers, the standard is 2 of the total transaction amount, and if the commission is less than 5 yuan, it will be charged at 5 yuan.

Shanghai Market: Investors who entrust brokerages to buy and sell convertible corporate bonds are required to pay a handling fee of RMB 1 per transaction in Shanghai and RMB 3 per transaction in other places. After the transaction, when the transaction is handled, the investor should pay a commission to the brokerage, the standard is 2 of the total transaction amount, and if the commission is less than 5 yuan, it will be charged at 5 yuan.

Trading rules: Convertible bonds are a relatively complex investment variety, and investors should understand the operating mechanism, understand the corresponding terms, and be familiar with the trading rules before intervening.

Legal Analysis: Convertible bonds refer to bonds that can be converted into a certain number of another type of bonds by the holder of a certain percentage or ** within a certain period of time, and refers to bonds that can be converted into a certain number of another type of bonds by a certain percentage or ** within a certain period of time. Features:

1. Creditor's rights; 2. Equity 3. Convertibility.

Legal basis: "Implementation Measures for the Issuance of Convertible Corporate Bonds by Listed Companies" Article 2 These Measures shall apply to listed companies in China (hereinafter referred to as issuers) to apply for the issuance of convertible corporate bonds subscribed in terms of human and RMB in China, and to be listed and traded on the ** exchange.

That is to say, if it is not a convertible bond, you will not receive so much money, for example, according to the ordinary bond, you should receive 1000, but when it is issued as a convertible bond, Zheng Han received 1500, then the excess 500 is the equity component, and the 1000 is the actual part of the liability that should be assumed.

This is mainly due to the difference in coupon rates. The so-called debt part refers to the present value of the interest rate that can be received in the future according to the coupon rate, and now the money given to you by others is calculated at a higher interest rate, which is equivalent to sincerity money. So split it up.

For example, if the same bond is issued as a general bond, it is 5%, but if a convertible bond is issued, it is 3%. Then the ordinary bond could receive 1,000, but the issuance of convertible bonds received 1,200, and the overcharge of 200 is the equity part, but the actual debt of this bond is still 1,000, because the 200 will be converted into shares in the future.

This question is indeed more complicated, it is more difficult to understand, and it is also very difficult to explain it through computer writing, so I will probably explain it to you here, if you still have questions, please continue to ask Pei Trembling! Learn from each other.

When bondholders convert to **, there are two accounting treatments to choose from: book value method and market value method. 1. Using the book value method, the book value of the converted bonds is regarded as the value of the exchange, and the conversion profit or loss is not recognized.

Those who agree with this approach argue that a company cannot incur a profit or loss as a result of the issuance, and that even if it does, it should be treated as (or offset) as capital reserve or retained profit or loss. In addition, the purpose of issuing convertible bonds is to convert the bonds into **, and the issuance** and the conversion of bonds are two complete transactions, rather than two separate transactions, and no profit or loss should be recognized at the time of conversion. 2. Under the market value method, the value basis of the exchange is the more reliable of its market price or the market price of the converted bond, and the conversion profit or loss is recognized.

The reason for adopting the market price method is that the conversion of bonds into spinal fluid is an important activity of the company, and the market price is quite reliable, and the conversion profit and loss should be recognized separately according to the two information quality requirements of Lu Xun's relevance and reliability. In addition, the recognition of shareholders' equity is also in line with the historical cost principle by adopting the market price method.

Article 159 of the Company Law provides that corporate bonds may be transferred, and the transferor and the transferee shall agree upon the transferor. If the corporate bonds are listed and traded on the ** exchange, they shall be transferred in accordance with the trading rules of the ** exchange. Article 160 Registered corporate bonds shall be transferred by the bondholders by way of endorsement or in other ways prescribed by laws and administrative regulations; After the transfer, the company shall record the name and address of the transferee in the corporate bond stub book.

The transfer of bearer corporate bonds shall be effective when the bondholder delivers the bonds to the transferee.

The fair value of the liability component = the coupon value of the bond, the present value of the compound interest, the present value of the annuity with negative interest, for example

Convertible corporate bonds with a par value of 50 million, a coupon rate of 5%, an effective interest rate of 6%, and a maturity of 5 years. The fair value of the liability component = 5000 * compound interest present value coefficient (that is, 5000 divided by (16%) to the 5th power) 5000 * 5% * annuity present value coefficient (generally you will be told, you can also check the lead in the annuity coefficient table).

1. Fair value:

Also known as fair market value, fair **. A transaction that is determined by a buyer and seller who are familiar with the market situation on an arm's length basis and voluntarily, or by an unrelated party that can be bought or sold or a liability that can be discharged under arm's length conditions.

Under fair value measurement, assets and liabilities are measured at the amount of the voluntary asset exchange or debt settlement between the two parties to the transaction who are familiar with the market conditions in an arm's length transaction. Purchasing a company's records of a consolidated business requires the use of fair value information. In practice, the net assets of the merged enterprise are usually assessed by an asset appraisal agency.

2. In any of the following three circumstances, the fair value of the swapped-in assets or the swapped-out assets shall be deemed to be reliably measurable:

1.There is an active market for the assets to be swapped in or out, and the fair value is determined on a market** basis.

2.Where there is no active market for the swapped in or outgoing assets, but there is an active market for the same or similar assets, the fair value is determined on the basis of the market for the same or similar assets**.

3.There is no comparable trading market for the same or similar assets for the swapped in or swapped out assets, and the fair value is determined by valuation techniques. When a valuation technique is used to determine fair value, it is required that the range of changes in the fair value estimate determined by the valuation technique is small, or that the probabilities used to determine the fair value estimate can be reasonably determined within the range of changes in the fair value estimate.

In China's economic market, the company can change the company's internal corporate bonds to convert, and the relevant converted corporate bonds need to be calculated in accordance with the relevant regulations of China. In line with the relevant laws and regulations of our country, to protect the legitimate rights and interests of such corporate bond buyers, the corresponding ** departments should also actively supervise.