The total value of a debenture of the balance sheet loan paying a premium on reimbursement should be entered in the liability column of the balance sheet, including the said premium. The counterpart of this premium should be recorded as an asset in a separate section of the balance sheet and amortised over the duration of the loan. The Commission des etudes comptables du Conseil national des commissaires aux comptes (Accounting Commission of the National Association of Statutory Auditors) found that these principles could also be applied to issues of convertible bonds paying a premium on reimbursement in view of the difficulty in evaluating the probability of the bonds being converted into equity. This solution is in contradiction with the commentaries of the tax authorities. Nevertheless, according to the Commission, in certain cases it is possible for the bonds to be converted into equity at the expected date and, therefore, for the accounting procedures described above not to be applied. A provision for contingencies will then have to be recorded in order to take into account the unpredictable nature of the debt in relation to the reimbursement of the premium.
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