Hello All, i am looking at these financials and there is a 64,086 million loss due to change in the value of issue bonds.
What standard requires a company to revalue issued bonds? Does this mean that the financial statement gets hit as the credit quality improves… I did not run across this back in my CFA days. Thanks!
financial statements does not get hit as credit quality improves. fianncial statements have debt marked at book.
a 100% owner of a firm. could theoretically pick up the bonds at the discounted market value. then roll it over to the firm to extinguish the debt. to massively boost the equity value at book.
usually debt sells at huge discount cuz company cannot pay back loan. the company could be losing money. or its assets could be suspect. in my example, i used cash, but the asset side could easily have been something less valuable like accounts receivable or inventory. etc.
my mistake. marked at fair value when financial statements are made. but as distressed debt goes, mkt value of debt can sink fast within a quarter form when it was marked
I didn’t read through those financials but banks have DVA as well which is much more common than what I think you’re referencing. I’m pretty sure both flow through OCI so shouldn’t impact tier core P&L.
If in fact loss from issued bonds, I think those bonds are probably puttable to the issuer. Assuming interest rates have changed, which drove the put being ITM, which is why they’re recognizing a loss