The convertible debentures
The company issued debentures may define the conditions in which the bonds that can be converted to a different type, such as stocks, debentures stocks embodied the ETCs from creditors (in case of buying bonds) become owners (stock holders)
Convertible debentures refer to debentures where the owner has the right to redeem the shares of the company issued another bond. Under the conditions set
From the definitions above, the convertible bonds are bonds issued by companies require that the shareholders can be converted into shares of another company. The conversion is based on a decision of the bondholders is crucial that it be converted or not. And should be converted, when But to comply with the terms of the conversion set. Typically, the interest rate of the convertible bonds will have a lower rate than normal. The bondholders have the right to convert the debentures into shares of the Company.
The conversion of debentures into equity shares. The 2 guidelines Is can practice
1. Recorded account shares issued in the market price of the shares at the date of conversion. (Market Value Approach) if the difference between the transaction is recognized as a gain or loss on conversion of debentures into equity shares.
2. Accounting records shares the issued to the book value of the convertible debentures as at. (Book Value Approach) if the difference between the transaction save it as capital or share premium discounts Or the under-valued shares.