A. INTRODUCTION
Objective
01 This Statement addresses the accounting treatment for warrants, either warrants issued together with the issuance of debt securities, warrants issued together with shares, or ACCOUNTING FOR WARRANTS SFAS No. 41 warrants that are issued separately from other securities.
Scope
02 This Statement addresses the accounting for warrants by the issuers, either warrants issued together with other securities or those issued separately.
Definitions
03 The following terms used in this Statement are defined as follows:
- Securities are marketable instruments such as promissory notes, commercial paper, shares, bonds and units of participation in collective investment contracts. Included in the definition of securities are forward contracts and other derivatives thereof.
- Warrants are securities issued by a company which give the right to holders to acquire shares from the company at a certain prices and for a specific period of time.
- Detachable warrants are warrants issued together with other securities, and can be traded separately from such securities.
- Nondetachable warrants are warrants which are attached to the debt securities and cannot be traded separately from such securities. Non-detachable warrants should be traded together with debt securities as one unit (package), for instance, convertible bonds.
- Naked warrants are warrants issued separately without the accompanying issuance of other securities.
EXPLANATION
04 As warrants give their holders the right to acquire shares from a company, warrants are classified as equity securities. The issuance of warrants may accompany the issuance of debt securities.
Detachable Warrants
05 Proceeds obtained from the issuance of debt-related securities which are accompanied with detachable warrants are allocated to both securities based on the respective fair values of each security at the time of issuance. The fair value allocated to warrants is reported as Other Paid-up Capital, and the remainder which constitutes the fair value of the debt security is reported as a Liability.
06 If warrants are exercised, the sum of the proceeds from the exercise and the fair value allocated to those warrants are recognized as Paid-up Capital and Additional Paid-up Capital (if any). If warrants are not exercised before the end of their exercise period, the carrying value of warrants recognized at the time of issuance should continue to be presented as Other Paid-up Capital. ACCOUNTING FOR WARRANTS SFAS No. 41
Nondetachable Warrants
07 Proceeds from the issuance of debt securities accompanied with nondetachable warrants are reported as Liabilities.
08 Companies which issue nondetachable warrants accompanying the issuance of debt securities, for instance, in the form of convertible bonds, have the obligation of settling the debt if the warrants are not exercised. Consequently, the value of nondetachable warrants is not recognized separately, and therefore all the proceeds obtained from the issuance of the debt security are recognized as Liabilities.
09 If warrants accompany the issuance of shares, all the proceeds from the issuance are recognized as Paid-up Capital and Additional Paid-up Capital (if any).
Naked Warrants
10 Companies generally issue naked warrants as an incentive for shareholders. The issuance of naked warrants to shareholders can be made free of charge or for a certain payment.
11 For the issuance of naked warrants which must be paid for by the recipient, the payments should be recorded as Other Paid-up Capital.
12 If naked warrants are provided free of charge to shareholders, they are not required to be accounted for as discussed in paragraph 9.
Warrants as Share Equivalents
13 Since warrants are equity securities, their issuance results in a dilution of earnings per share.
Disclosures
14 The financial statements should disclose:
a. the basis for determining the fair value of warrants;
b. the value of warrants not yet exercised and the value of unexercised (expired) warrants;
c. the amount of issued and outstanding warrants as well as their dilution effect; and
d. conditions associated with the issuance of the warrants. ACCOUNTING FOR WARRANTS SFAS No. 41
STATEMENT FOR FINANCIAL ACCOUNTING STANDARD NUMBER 41
ACCOUNTING FOR WARRANTS
Statement of Financial Accounting Standard No. 41 consists of paragraphs 15-23. This Statement should be read in the context of paragraphs 1-14.
Detachable Warrants
15 Proceeds obtained from the issuance of debt-related securities which are accompanied with detachable warrants are allocated to both securities based on the respective fair values of each security at the time of issuance. The fair value allocated to warrants is reported as Other Paid-up Capital, and the remainder which constitutes the fair value of the debt security is reported as a Liability.
16 If warrants are exercised, the sum of the proceeds from the exercise and the fair value allocated to those warrants are recognized as Paid-up Capital and Additional Paid-up Capital (if any). If warrants are not exercised before the end of their exercise period, the carrying value of warrants recognized at the time of issuance should continue to be presented as Other Paid-up Capital.
Nondetachable Warrants
17 Proceeds from the issuance of debt securities accompanied with nondetachable warrants are reported as Liabilities.
18 If warrants accompany the issuance of shares, all the proceeds from the issuance are recognized as Paid-up Capital and Additional Paid-up Capital (if any).
Naked Warrants
19 For the issuance of naked warrants which must be paid for by the recipient, the payments should be recorded as Other Paid-up Capital.
20 If naked warrants are provided free of charge to shareholders, they are not required to be accounted for as discussed in paragraph 9.
Warrants as Share Equivalents
21 Since warrants are equity securities, their issuance results in a dilution of earnings per share.
ACCOUNTING FOR WARRANTS SFAS No. 41
Disclosures
22 The financial statements should disclose:
a. the basis for determining the fair value of warrants;
b. the value of warrants not yet exercised and the value of unexercised (expired) warrants;
c. the amount of issued and outstanding warrants as well as their dilution effect; and
d. conditions associated with the issuance of the warrants.
Effective Date
23 This Statement is effective for the preparation and presentation of financial statements covering periods beginning on or after January 1, 1998. Earlier application is strongly encouraged.
SOURCE:
Tidak ada komentar:
Posting Komentar