The Classification of Liabilities or Equity on Convertible Bond Issuance Transactions at PT ABC Mochammad Kiky Noviar, Aria Farah Mita
Prof.Dr. Mohammad Sadli Building,
Sumitro Djojohadikusumo Campus
Jl. Salemba Raya No.4, UI Salemba Campus,
Special Capital Region of Jakarta 10430
mkikyn[at]gmail.com
aria.farahmita[at]ui.ac.id
Abstract
This research aims to analyze the implementation of PSAK 50 (2014) in determining the classification of liabilities or equity on convertible bond issuance transactions at PT ABC. PT ABC is a start-up company with a status as a foreign investment company effective since August 2020, which then issued convertible bonds in December 2020. The convertible bond was issued as a payment instrument for the acquisition of 100% ownership in KLM, an overseas entity. The convertible bonds were entirely absorbed by only one party, XYZ, the owner of 100% of KLM^s shares, prior to the acquisition transaction. This case study research uses qualitative descriptive analysis based on data analysis techniques, namely data reduction, data presentation, and conclusion drawing using text-based content analysis. The study demonstrates that it is important to consider some qualitative factors to ensure the tone and substance of the transaction are reflected adequately under PSAK 50 (2014) and that the classification of an instrument as a liability or equity is heavily dependent on the specific facts and circumstances of the transaction. In this case, the results showed that the convertible bond instrument at PT ABC was classified as equity. This conclusion obtains by considering the understanding of the substance above in the form that convertible bonds have no contractual obligations and are mandatory for conversion.
