Serial bonds
An issue of bonds that mature in part at one date, another part on another date, and so on. The various maturity dates usually occur at equally spaced intervals. Contrast with term bonds.
Bond indenture
The contract between an issuer of bonds and the bondholders.
Yield to maturity
At a given time, the internal rate of return of a series of cash flows.
Current market interest rate
At a given time, the rate the market charges a borrower. Pertinent for fair value accounting for debt.
Internal rate of return
The discount rate that equates the net present value of a stream of cash outflows and inflows to zero.
Effective interest method
In computing interest expense (or revenue), a systematic method that makes the interest expense (revenue) for each period divided by the amount of the net liability (asset) at the beginning of the period equal to the yield rate on the liability (asset) at the time of issue (acquisition). Interest for a period is the yield rate (at time of issue) multiplied by the net liability (asset) at the start of the period. The amortization of discount or premium is the plug to give equal debits and credits. (Interest expense is a debit, and the amount of debt service payment is a credit.)
Constructive capitalization
Some long-term non cancellable leases are operating leases. Consider, for example, a ten-year lease on a shopping center store site. An analyst might want to see the effect on the lessee's financial statements of treating the present value of the contractual commitments as balance sheet items, an asset for the leasehold and a liability for the obligations to pay. This term refers to the process of debiting the present value of the lease commitments to an asset and crediting the amount to a liability, for analysis.
Off-balance-sheet financing
A description often used for an obligation that meets all the tests to be classified a liability except that the obligation arises from an executory contract and, hence, is not a liability.
Joint ventures
Two or more firms invest in a project or company or division, sharing risks and rewards of ownership and management.
Securitization
The bundling of financial assets into groups that can become the basis for raising cash.
Net defined benefit liability (asset)
IFRS term for the excess of liabilities over assets (or excess of assets over liabilities) for all a firm's defined benefit pension plans.
