Financial reporting and PIK notes: Difference between pages

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Debt instruments based on non-cash payment of interest coupons.


Financial reporting is traditionally external.
Interest is usually recognised by an increase in the amount of principal owed by the borrower.


It is concerned with collating and providing information to external stakeholders, the financial markets and the public.


Contrasted with management accounting, which provides information for internal stakeholders.
PIKs are generally either unsecured loans or deeply subordinated securities ranking just before equity in the capital structure.  


This means that, in the event of a bankruptcy, PIKs are the last debts to be repaid, making them a high risk instrument for lenders and investors.


2.
In order to compensate lenders for the risk, PIKs have to offer significantly enhanced rates of return to investors.
 
The term 'financial reporting' is also used by some organisations in a broader sense, to include internal reporting (as well as external).
 
 
Financial reporting is also known as ''financial accounting''.
 
 
:<span style="color:#4B0082">'''''The objective of financial reporting (IFRS)'''''</span>
 
:The users of financial information need to assess:
 
:*Prospects for future net cash inflows to the reporting entity; and
:*Management's stewardship of the entity's economic resources.
 
 
:Accordingly, financial reporting seeks to provide information about:
 
:*The entity's economic resources (assets), claims against the entity (liabilities) and changes in those resources and claims; and
:*How efficiently and effectively management has discharged its responsibilities to use the entity's economic resources.




== See also ==
== See also ==
* [[Assets]]
* [[Coupon]]
* [[Closing exchange rate]]
* [[Conceptual framework]]
* [[Credit]]
* [[Entity]]
* [[Equity]]
* [[Equity]]
* [[Finance]]
* [[Interest]]
* [[Financial accounting]]
* [[Notes]]
* [[Fiscal]]
* [[Payment in kind]]
* [[FP&A]]
* [[Principal]]
* [[International Financial Reporting Standards]] (IFRS)
* [[Secured debt]]
* [[Liabilities]]
* [[Subordinated debt]]
* [[Management accounting]]
* [[Unsecured debt]]
* [[Management efficiency ratio]]
* [[Primary statements]]
* [[Stakeholder]]
* [[Stewardship]]
* [[Useful financial information]]
 
[[Category:Accounting,_tax_and_regulation]]

Revision as of 14:21, 22 August 2017

Debt instruments based on non-cash payment of interest coupons.

Interest is usually recognised by an increase in the amount of principal owed by the borrower.


PIKs are generally either unsecured loans or deeply subordinated securities ranking just before equity in the capital structure.

This means that, in the event of a bankruptcy, PIKs are the last debts to be repaid, making them a high risk instrument for lenders and investors.

In order to compensate lenders for the risk, PIKs have to offer significantly enhanced rates of return to investors.


See also

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