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Discount on issues of debentures treatment in CFS

Atharv Sankliya (1306 Points)

22 May 2022

discount on issues of debentures' treatment in cash flow statement ?

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4 Replies

yasaswi gomes (My grammar is 💯 good I) (7290 Points)
Replied 22 May 2022

I treat discount as a non equity component

All income statement items fall under Operating activities.

Similarly, current assets and current liabilities fall under cash flows from operating activities.

I never prepared a CFS which includes discount. Will check out with you soon.

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yasaswi gomes (My grammar is 💯 good I) (7290 Points)
Replied 22 May 2022

Alright, when we amortise the debenture or at initial recognition, the PV discounted amount is not recognised but the closing balance is. Discount is neither recognised in finance costs like EIR nor it impacts bank coupon payment. It is also not a gain or loss.

So I scanned the AS3 document and I could not find discount issue as important here. So just follow the line items and recognise them in financing activities. Microsoft Word - AS 3.doc (mca.gov.in)

(Error: I forgot that I also dont treat discount in finance costs)

yasaswi gomes (My grammar is 💯 good I) (7290 Points)
Replied 23 May 2022

Are you at college? Good! Look, I have a financial statement analysis text which suggests

Dr. Bank

Dr. Discount allowed

Cr. Debentures (issue value and not proceeds)

So I have read the Indian GAAP extensively and found out that there is no mention of Discount or premium. Check out with your lecturers and find out and recommend them to include these issues.

Now, coming to your query, if discount is allowed into income statement or not is immaterial to cash flow statement because you have reconciled PBT into operating cashflows.

Crap no one knows what is real education CA or MBA.

yasaswi gomes (My grammar is 💯 good I) (7290 Points)
Replied 23 May 2022

Somehow, marketing must leave accounting and what issue proceeds received will be same as face value redeemable. This ways, no one has to claim any tax losses for what is not required. Why to create techniques and claim something which is not there. Check out my blogspot for debt investment decissions.