Calculating the Constant Yield Using Excel

Posted by & filed under Debt, Derivatives.

I’ve had numerous requests to show how the constant yield rate for debt cost amortization is computed in the sample Excel effective interest method calculations. The idea is pretty simple once you have the formulas set up. The objective is to determine the rate that drives the amortization balance to zero on the maturity date… Read more »

The Effective Interest Rate Method

Posted by & filed under Debt, Equity-Linked Transactions.

The effective interest rate method, or interest method as it is referred to by the FASB in the codification, spreads the total cost of debt over the life of the debt at a constant interest rate. This constant interest rate is also referred to as the constant interest yield. The constant interest rate includes the… Read more »

Definition of a Derivative – Criteria #1

Posted by & filed under Derivatives.

This is the first in a series of posts exploring derivative accounting guidance. The focus of these posts will be the effect derivative accounting has on traditional equity and debt capital raising transactions. I’ll start with the basics and move into some meaty areas that are common pitfalls. There are three criteria to the accounting… Read more »

GAAP Hierarchy Applicable to Debt

Posted by & filed under Debt.

Accounting Standards Codification (ASC) generally applicable to debt is either missing (because the applicable accounting is ‘generally accepted’), or found in locations other than the primary Codification topic for debt, ASC 470, Debt. Here’s my take on the debt accounting hierarchy from both a practical point of view and as defined in the Codification. This… Read more »