Now to make silk purses (assets) out of sows’ ears (liabilities)

I have noticed a few companies using some ingenious accounting to create assets by issuing liabilities.

I have noticed a few companies using some ingenious accounting to create assets by issuing liabilities. One would have thought that debit cash credit liabilities would be a fairly simple transaction when you issue debt.  Not so when that debt is convertible debt issued with a warrant.

The way the scheme runs is a follows. The text books and the ancient APB 14 tell us that when you issue debt with detachable warrants you have to separate the warrants out from the debt and take the value assigned to the warrants to paid in capital. Continue reading “Now to make silk purses (assets) out of sows’ ears (liabilities)”