Economics is not only a science that studies different spheres of human activity, but also an integral part of culture.
It is not necessary for everyone to have an economic education, but all who consider themselves modern and advanced should know and understand the basic concepts and have at least some idea of securities. In this article we will talk about what a bond is, what kinds it has, in what form it is issued and implemented. The market and accounting of this financial instrument will be considered. The issue of similarities and differences in such types of securities as stocks and bonds will also be touched upon. Let's start with the concept.
What is a bond and how to use it?
This is a kind of securities that regulate the debt relations of people, organizations and the state.
Answering the question, what is a bond, it is worth noting, in this case obligations arise from a legal entity that was engaged in their issue. It undertakes to pay at a certain time, that is, to pay the nominal value of the paper to its owner. In addition, a fixed percentage is paid on the bonds to the holder.
Bonds can be bought, changed, donated or transferred on such terms as will be arranged by the holder of this paper. With the help of these securities, you can receive additional income, which is the interest received and the discount granted at the time of purchase.
At a discount in this situation is understood the difference between the nominal value and the sale price. In other words, these are debt obligations. The economic essence of bonds in their sense is very similar to credit. To make it even easier to understand, we can say that the buyers of these securities give their own funds to the debt of the company that issued them. The organization is paid interest after a while, and at the end of the term it completely gives up its debt.
With the concept of what a bond is, let's move on to their types.
Classification of bonds
The securities in question may be state or corporate, depending on the entity that issued them. The first, as it becomes clear, is the state, and others - commercial organizations of various kinds, for example, the bank's bonds. There are several more classifications.
Classical division into types of bonds:
- Without security. This type of security gives owners the opportunity to receive income and return the invested amount. The unsecured bonds are not available of certain collateral and guarantee charge acts the value of the credit rating of the Issuer and the image of his organization. Secured give the similar rights, but there is a Deposit in the form of property.
- By the life of the bonds can be with a certain period of validity and without it.
- Bonds can be convertible and non-convertible. The first implies that they can be exchanged for other securities, and the latter - not.
- Depending on which bonds in the form of return, there are coupon and discount securities. For the first payment of a certain percentage relative to the initial value, and a second income depends on the difference between nominal value and acquisition cost.
- By type of income – permanent, fixed, floating or sinking income. In this case there are the following types of bonds: for the first type, the person who purchased the securities, knows how much revenue it will receive in the end
Comparative characteristics of stocks and bonds
Both securities are a tool for attracting additional funds to the organization. But still they have certain differences.
- Bonds can be issued not only by joint stock companies, but also by the state and municipalities.
- Dividends are not paid on bonds.
- Bonds guarantee the receipt of income, it is fixed and does not depend on what profitability the firm has.
- If the company goes bankrupt, then, first of all, obligations are fulfilled to those who own bonds. As for shares, then in this case creditors' claims are first satisfied.
- Bond holders have no right to participate in the activities of the enterprise.
- The bonds have a limited time. The shares are in circulation on the market until the company is liquidated.
- Bonds in the "falling" market will have a greater income. In shares, he will, on the contrary, be on the "growing".
- Bonds little changed price during the period of validity. They are more dependent on the economic situation and interest rates on deposits. And the value of shares depends on the success of the company.
- Bonds have the highest return with minimal risks. Shares yield more income at a higher risk.
If we talk about similarities, then there are only two of them: both stocks and bonds are securities and they are traded in the stock market.
Features of the market
Here it is necessary to say about the main state bonded loans, because in our country the modern bond market is represented mostly by government securities. They can be market and non-market. The most famous of them are government short-term bonds, federal bonds, government savings bonds and domestic currency loan bonds, they are characterized by a secondary bond market.
Who has the right to issue bonds?
Issue and placement of these securities is allowed to be carried out by limited liability companies and joint-stock companies in accordance with the legislation.
Form of bonds
They can be documentary (when the right of possession is established on the basis of a certificate) and uncertificated (when the right of ownership is fixed in a special register or account).
Issue of bonds
Two main conditions:
- They should be placed by issues.
- Provide the same rights in the same issue, regardless of the time of purchase of the paper.
The emission is carried out in several stages:
- First, a decision is made on the placement of bonds.
- This decision is approved.
- State registration of the issue is carried out.
- Placement of bonds.
- State registration of the report.
The decision to issue is approved by the management body. The decision should include the following:
- Number and value of securities.
- The form.
- Order and maturity.
- Ways of accommodation.
- Cost of placement.
State registration is carried out by the Central Bank, as well as by the registration authority.
Placement of bonds
It is carried out by subscription of an open or closed type. The issuer completes the procedure on time, which was determined at the time of the decision.
Open subscription implies the possibility of obtaining bonds by any persons at special auctions. When placing such bonds, not only their issue is registered, but also the prospectus.
Under a closed subscription, bonds are placed only for a limited number of persons. It is worth remembering that closed joint-stock companies are allowed to deal with placement only through such a subscription.
Not later than one month after the end of the bond placement, the company that issued the issue provides a report to the Bank of Russia on the results of the issue in order to conduct the state registration of the report simultaneously with the registration of the issue.
Accounting for the issue
It is implemented with the help of the accounting regulations.
In particular, expenses related to the payment of funds on bonds include:
- interest that is due to be paid to creditors;
- payment of various consultations and information services that are related to the issue of the loan and other expenses.
The issuer reflects debt on bonds as a short-term obligation, if it remains less than one year before it is repaid. If the period is exceeded, it will be considered long-term.
Long-term liabilities are reflected in the 52-rd "Long-term obligations under bonds", which is designed specifically to take into account the calculations for issued securities, which will need to be extinguished no earlier than 12 months. The rolled-up balance is reflected in the third section of the balance sheet.
Over the 12 months to maturity long-term bonds, it is short-term. The commitments recognised in 521, 522 and 523 and is transferred to the subaccount of account 61 "Current debt on long-term liabilities".
If you do not follow these rules, then the balance sheet will not show a real picture, as long-term obligations will also take into account those that need to be paid off, for example, within one month from the time of balancing. Thus, the enterprise users will be misled, since the sub-account 521 will correspond not with the 31st account, but with the 61st.
In order to take into account short-term bonds, a separate account in the plan, which is available for long-term bonds, is not provided. In this case, it is better to have three such additional sub-accounts on account 60 "Short-term loans". The collapsed balance is reflected in the fourth section of the balance sheet.