When a debenture is issued at a price below its nominal value, it is said to be issued at a discount. For example, the issue of Rs 100 debentures at Rs 95, Rs 5 being the amount of discount. … The discount on issue of debentures can be written-off either by debiting it to profit and loss or to securities premium account.
Can we issue debentures on discount?
Unlike shares, a company can issue debentures at a discount which is called “Debentures issued at Discount”. Giving debentures at a discount increases the capital of the company with respect to the less increase in the Cash for it.
Can debentures issued at discount be redeemed at discount?
Discount on issue of debentures a/c Dr. Explanation: In this case debentures are issued at discount but redeemable at par. This means that the company will get less than the face value but will redeem full face value.
Can debenture be issued at premium?
Debentures are said to be issued at a premium when the amount collected for it, is greater than the nominal value (face value) of the debentures.
How debentures can be issued?
Debentures can be issued for non-cash considerations. The company may have purchased assets from some vendors or acquired some other business. Then instead of paying cash, the company may issue debentures to such vendors. Such an issue for debentures can be at par, or for a discount or at a premium.
Can debentures be issued to individuals?
Yes, a Private Company can issue bonds/debenture under the Companies Act 2013. … A Private Company can do private placement and also listing the same in BSE or NSE under the debt segment after complying with the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.
What is the issue price of a debenture?
When the issue price of the debenture is equal to its face value, the debenture is said to be issued at par. When a debenture is issued at par, the long-term borrowings in the liabilities section of the balance sheet equals the cash in the assets side of the balance sheet.
What is the treatment of discount while issuing debentures?
Discount on issue of debentures can be treated as deferred revenue expenditure and written off against revenue over the period of life of the debentures.
How is discount on issue of debenture treated?
Discount on issue of debentures is a capital loss and over a period of 3 to 5 years or is charged to “Securities Premium Account” as per the guidelines issued by ICAI. The discount on issue of debentures can be written-off either by debiting it to profit and loss or to securities premium account.
What debenture holders will get?
Debenture holders will be paid before preferred shareholders but may be subordinate to other types of debt on the company’s books such as senior loans. If the funds allow, a debenture holder may receive their full repayment of the bond’s principal with interest.
Can debentures be issued for more than 10 years?
Under the Companies Act, 2013, it is reiterated that in case of Redeemable Debentures the maximum period of redemption is 10 years from the date of issue, except certain specified companies infrastructure companies where the maximum redemption period can be exceeding ten years but not exceeding thirty years.
How are premium debentures calculated?
If debentures are issued at a price more than its nominal value (face value) such an issue is called issue at a premium. For example, if a debenture of Rs. 1000 is offered at 1,050, it is a case of issue of debentures at premium. The excess of issue price over face value is premium.
Are debentures equity?
Convertible debentures are bonds that can convert into equity shares of the issuing corporation after a specific period. … However, the holders of the debenture have the option of holding the loan until maturity and receive the interest payments or convert the loan into equity shares.