According to my cfa note it says that the company’s asset and liability should increase by the bond proceeds when issued bonds. So my understanding is that when companies issue bonds at discount/premium, the balance sheet liability should increase by the amount of all future cash flows discounted at market rate at issuance, is that correct? Or on the balance sheet asset and liability still increase by the face value regardless of bonds being issued at par or discount/premium?
Yes. Both cash and bond liability will increase by the PV of the cash flows (i.e. issuance proceeds).
If its a discount (premium) bond, then the book value of liability will increase (decrease) towards par as it approaches maturity
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thx so much for the explaination fino!
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