A re-examination of the case for accounting separately for the debt and equity features of convertible debt.


Casson, Peter (1998) A re-examination of the case for accounting separately for the debt and equity features of convertible debt. Journal of Business Finance and Accounting, 25, (5&6), 595-612. (doi:10.1111/1468-5957.00203).

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Original Publication URL: http://dx.doi.org/10.1111/1468-5957.00203

Description/Abstract

The case for accounting separately for the debt and equity features of a convertible bond is based on two main assumptions: convertible debt can be decomposed into two, or more, fundamental financial instruments, and a convertible bond has the same economic substance as a bond with a detachable warrant. These assumptions are re-examined in this paper where it is shown that it is generally not possible to decompose a convertible bond into fundamental financial instruments, nor is it possible to form a package of a bond and a detachable warrant that replicates the character of the convertible bond.

Item Type: Article
ISSNs: 0306-686X (print)
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Subjects: H Social Sciences > HD Industries. Land use. Labor > HD28 Management. Industrial Management
H Social Sciences > HB Economic Theory
Divisions: University Structure - Pre August 2011 > School of Management
ePrint ID: 36841
Date Deposited: 20 Mar 2007
Last Modified: 27 Mar 2014 18:23
URI: http://eprints.soton.ac.uk/id/eprint/36841

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