A	B	C	D	E	F	G	H	I	J	K	L	M
1		BondTerrier
2		Accounting for the Life-Cycle Events of Bond Liabilities that are: (a) Convertible at the holder's option into Common Equity at a specified share price [i.e., at at fixed rate or exchange ratio] and (b) Callable at the issuer's option. Life-Cycle Events: Issuance, Bifurcation; Interest Payments; Discount/Premium Amortization; Conversion; Call; Maturity.
3		BondTerrier's objective is to supplement textbooks teaching accounting for bond liabilities that are (a) convertible at the holder's option into common stock at a specified share price [i.e., at at fixed rate or exchange ratio] and (b) which may be callable at the issuer's option at a specified price. BondTerrier allows the user to choose either (i) IFRS [IAS 32 & IFRS 9] or (ii) U.S. GAAP's ASC 815's scope exception for conventional convertible debt where requirements for equity classification in ASC 815-40-25-10 and ASC 815-40-55-2 through ASC 815-40-55-6 are not applicable.
5		BondTerrier permits the user to choose to account for these financial instruments as either (i) conventional convertible debt in accordance with the above mentioned U.S. GAAP's ASC 815's scope exception for conventional convertible debt or (ii) as 'hybrid' ('compound') financial instruments according to IFRS. When applying IFRS BondTerrier assumes: the convertible option is (a) a derivative, (b) is not closely related to the bond liability, and (c) can be separately measured; (hence the convertible option is separated from the bond liability). When applying IFRS BondTerrier also assumes the issuer's call option (if any) is closely related to the bond liability; hence this option is not separated from the bond liability. After initial recognition BondTerrier measures the financial liability at amortized cost when applying either (i) the above mentioned U.S. GAAP's ASC 815's scope exception for conventional convertible debt or (ii) IFRS.
6		Your feedback regarding BondTerrier will be used to improve it for future users. Please send comments to:
7		conheady@telfer.uottawa.ca
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9		For accounting for non-convertible bond liability life-cycle events, see:						bondbeagle.com
10		For accounting for bond liabilities convertible at the issuer's option, see:						bondlabrador.com
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12		BondTerrier deals with:
13		·        The application of either (i) IFRS or (ii) the above mentioned U.S. GAAP's ASC 815's scope exception for conventional convertible debt to accounting for the life-cycle events of bond liabilities that are (a) convertible into common stock at a specified share price [i.e., at at fixed rate or exchange ratio] at the holder's option and (b) which may be callable at a specified price at the issuer's option: issuance, bifurcation; interest payments; discount/premium amortization; conversion; issuer's call; settlement for cash at maturity.
14		·        Straight-line or effective-interest-rate amortization of the discount/premium.
15		·        The Residual (required by IFRS) and proportional approaches to bifurcating/splitting the bond issuance proceeds between the liability and equity elements (not applicable if applying the above mentioned U.S. GAAP's ASC 815's scope exception for conventional convertible debt).
16		·        The application of the book value (required by IFRS) and market value methods upon conversion of the bonds.
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18		BondTerrier does not deal with:
19		·        Accounting for non-convertible bond liability life-cycle events: see						bondbeagle.com
20		·       Accounting for bond liabilities convertible at the issuer's option: see						bondlabrador.com
21		·        Defeasance.
22		·        Serial bonds.
23		·        Troubled debt restructuring: see				bomode.telfer.uottawa.ca/tdr/tdr_sheet.aspx
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26		Constraints:
27		·        When applying IFRS BondTerrier assumes the convertible option is (a) a derivative, (b) is not closely related to the bond liability, and (c) can be separately measured; hence the convertible debt instrument is bifurcated upon issuance into its components (i.e., the convertible option is separated from the bond liability).
28		·        When applying IFRS BondTerrier assumes the issuer's call option (if any) is closely related to the bond liability; (hence this option is not separated from the bond liability).
29		·        When applying the above mentioned U.S. GAAP's ASC 815's scope exception for conventional convertible debt BondTerrier assumes the convertible debt is considered 'conventional' under U.S. GAAP's ASC 815-40-25-39 and the requirements for equity classification in ASC 815-40-25-10 and ASC 815-40-55-2 through ASC 815-40-55-6 are not applicable. [see page 6/6 at https://www.pwc.com/us/en/cfodirect/assets/pdf/accounting-guides/pwc-guide-financing-transactions-debt-equity.pdf, sighted 20190806]. The following, somewhat dated [it refers to FAS-133] but understandable, explanation of 'conventional debt instruments' is provided on page 10.10 of Financial Instruments: A Comprehensive Guide to Accounting & Reporting (2009) by Rosemarie Sangiuolo, Leslie F. Seidman, Leslie F. Seidman CPA, ISBN: 978-0-80809-216-2:
30		"Conventional debt instruments generally are not required to be bifurcated under FAS-133. An instrument can be considered a conventional debt instrument if it provides the holder with an option to convert into a fixed number of shares or equivalent amount of cash (at the discretion of the issuer) and the ability to exercise the option is based upon the passage of time or a contingent event. (This would include instruments that contain the "standard" antidilution provisions, which result in adjustments to the conversion ratio in the event of an equity restructuring transaction designed to maintain the value of the conversion option)."
31		When applying IFRS BondTerrier assumes the issuer's call option (if any) is closely related to the bond liability; (hence this option is not separated from the bond liability).
32		·        1, 2 or 4 interest payments, in cash, per year.
33		·        Assumes issuance, call, and conversion occur on interest payment anniversary dates.
34		·        Ignores bond issuance costs.
35		·        The stated (coupon) interest rate must be >= 0%. The yield, if known, must be > 0%.
36		·        Assumes interest payments occur on either the first or the last day of a month.
37		·        Percent of bonds converted: 0% to 100%.
38		·        Percent of bonds called: 0% to 100%.
39		·        Call price as a % of face value must be > 0%.
40		·        Maximum of one conversion event during the bond's life-cycle.
41		·        Maximum of one issuer-call event during the bond's life-cycle.
42		·        Number of decimal places for the present value calculations: 3, 4, 5, 6, 7 or 8.
43		·        The amortization table displays a maximum of 40 interest payment periods.
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45		BondTerrier output:
46		BondTerrier automatically generates journal entries and supporting explanations for life-cycle events including issuance, bifurcation, interest payments, call, conversion, and maturity in accordance with either IFRS or the above mentioned U.S. GAAP's ASC 815's scope exception for conventional convertible debt.
47		If directed to apply IFRS BondTerrier demonstrates bifurcation (how the bond issuance proceeds are split between the liability and equity components), using either the residual or proportional methods: note that IAS32.31 and IAS32.32 stipulate the residual method only. The book value and market value methods can be used to record the conversion of the bonds.
48		An amortization table is provided as well as a determination and/or corroboration of the bond's yield (IRR). An "Any Period" screen enables the user to display the interest expense journal entry for the period of his/her choice.
49		Also generated (and displayed in the TEXT screen) is a 'reverse-engineered' textual version of the data entered in the INPUT screens by the user.
50		BondTerrier can address the situation where the bond contract represents a compound financial instrument comprising the bond liability and two embedded derivatives [(i) the holder's convertible option and (ii) the issuer's call option].
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52		BondTerrier (c) Brian A. Conheady. All Rights Reserved.
53		This learning-application contains copyright material of the IFRS® Foundation in respect of which all rights are reserved. Reproduction and use rights are strictly limited. Please contact the IFRS Foundation for further details at permissions@ifrs.org<mailto:licences@ifrs.org>. Copies of IASB® publications may be obtained from the IFRS Foundation’s Publications Department. Please address publication and copyright matters to publications@ifrs.org<mailto:publications@ifrs.org> or visit our webshop at http://shop.ifrs.org.
54		Disclaimer: To the extent permitted by applicable law, the Board and the IFRS Foundation expressly disclaim all liability howsoever arising from this publication or any translation thereof whether in contract, tort or otherwise to any person in respect of any claims or losses of any nature including direct, indirect, incidental or consequential loss, punitive damages, penalties or costs. Information contained in this publication does not constitute advice and should not be substituted for the services of an appropriately qualified professional.
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