The Accounting Recognition And Measurement Analysis Of Convertible Bonds

Convertible bonds allow holders to exercise the conversion rights under certain conditions and convert them into company stocks.It has both the characteristics of bonds and the characteristics of stocks.It has unique advantages compared with simple bonds or stocks.China introduced convertible bonds in the early 1990 s.Convertible bonds have been developed in China for more than two decades.The domestic market structure is not complete and the relevant guidelines are not perfect.Most studies of convertible bonds in China focus on pricing,issuing motives and wealth effects of announcements.There is not much research on accounting confirmation and measurement of convertible bonds.On the other hand,convertible bonds are mixed and contain both liability and equity features,therefore their accounting treatment is complex.Therefore,it is necessary to sort out the accounting confirmation and measurement process of convertible bonds.First of all,this paper sorts out domestic and foreign research literatures on convertible bonds and elaborates domestic and foreign accounting standards.It lays a theoretical foundation for the study of accounting treatment.Secondly,this paper introduces the relevant conditions of convertible bonds,including the meaning,terms,nature,advantages,and distribution status in China.Then,this paper compares the terms of convertible bonds at home and abroad.The reasons for the differences are mainly the differences in dividend policies.This paper explains the accounting treatment of convertible bonds and analyses the impact of dividends of listed companies in China and the downward revision of the conversion price.And then it analyzes the impact of the accounting treatment of convertible bonds,which provides ideas for the following case analysis.Then,through the case of Gree Real Estate's issuance of convertible bonds,we judge whether its accounting confirmation and measurement conform to the accounting standards and calculate the impact of financial statements.Finally,we draw conclusions and make recommendations.The main conclusions of this paper are as follows: firstly,in China,when a listed company makes a dividend,although the company's stock price and the convertible bond's conversion price have both fallen,the value of the convertible bond has not changed,which means that investors can obtain relatively definite returns,the uncertainty in holding convertible bonds in the future will be reduced,which will increase the debt of China's convertible bonds.Secondly,through the case study of Gree's convertible bond,it does not meet the requirement of “fixed exchange” and should not be split into “liabilities + equity”.It should be recognized as a liability with embedded derivatives and be split into “liabilities + derivatives”."The derivative component has the characteristics of a liability.It was found that Gree Real Estate's convertible bonds' accounting treatment was inconsistent with the accounting standards.Chinese companies mostly recognize the accounting treatment of convertible bonds as “liability + equity”,although the impact on the financial statements is relatively small.On this basis,the implementation plan of China's accounting standards should be further improved,and in strict accordance with the conditions for confirmation of liabilities and equity,the method of splitting and the method of pricing according to the specific terms of the convertible bonds.Listed companies and auditors should implement the guidelines more strictly,and regulators should strengthen supervision over the design of dividend policies and convertible bonds.Investors should invest rationally,not blindly convert their shares,and increase their awareness of risk prevention.