5. Presentation and Disclosure of Long-Term Debt

e. describe the financial statement presentation of and disclosures relating to debt;

How are bonds payable typically shown on the balance sheet? Bonds payable and unamortized discounts or premiums are typically shown on the balance sheet as long-term liabilities

If a bond issue will mature within a year, how should it be reported on the balance sheet? If a bond issue will mature within a year, it should be reported as a current liability if the issue will be retired using current assets. However, the issue should continue to be reported as a long-term liability if it is to be replaced with another bond issue, converted into stock, or paid off with non-current assets.

What incentive would a company have to issue a bond that is convertible into shares, or with a warrant attached? The reason for doing this is to add a sweetener to a bond issue. Because of the benefit to the investor (the ability to obtain shares of the company), the issuer is able to issue the bonds at a lower interest rate than would be the case for a straight bond.