Hi forums,
I’m going through Reading 31 Example 8, which has a table of long-term debt disclosures. The table shows the effective interest rate for several bonds (which does not change because, as the reading points out, that was the market rate at the time the debt was issued) and shows the carrying amounts year over year.
I’m puzzled because the answer to a question points out that the carrying amounts for a security with a coupon rate of 4.95% and market rate of 4.95% remains the same because “the effective interest rate at which the debentures were issued is the same as the coupon rate”. That makes sense. However, there are other securities for which the effective rate and coupon rate are different with the carrying amount not changing. Isn’t this inconsistent or is there something I’m missing?