Dim Sum Bonds At Renault S.A. Harvard Case Solution & Analysis

This case investigates the accounting for long-term debt from the perspective of the entity that issues bonds payable.

The international setting involving France-based Renault issuing Chinese Yuan-denominated debt in the international markets (i.e., “dim sum bonds”) provides substantial opportunity for secondary learning.

The accounting could be undertaken from the standpoint of U.S. GAAP or IFRS (i.e., the standards are indistinguishable for the principal trade and occasions considered in this scenario, with the exception of hypothetical conversations related to the fair value alternative for debt, are available under SFAS 157 in U.S. GAAP).

The case requires students to account for the issuance of bonds offered at a discount, to execute the effective interest method for several periods, to calculate the quantity of interest expense that will be billed to the income statement over the life of the discounted bonds (i.e., to understand the economic rationale behind the recommended effective interest rate method). Furthermore, this also requires the students to comprehend the income statement consequences of early debt extinguishments and the trade entries associated with these trades, and to contemplate the consequences of the fair value approach had the issuer made this election.

Publication Date: 04/13/2016

This is just an excerpt. This case is about Finance

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