CFA CFA Level 1 How do one account for warrants emission in the balance sheet?

How do one account for warrants emission in the balance sheet?

  • This topic has 3 replies, 2 voices, and was last updated Jun-17 by vincentt.
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    • huwabara
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      On the asset side, we add the proceeds to the cash. On the liability side, what do we do?

      Adding it to non distributed earnings doesn’t seem fair. Is it?

      Thanks for your help on this existential question.

    • vincentt
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      Since, Asset = Liability + Equity

      Step 1: add cash to asset
      Step 2: add cash to equity (retained earnings to be specific)

      That way it would balance out.

    • huwabara
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      Agreed. But still, that doesn’t seem right to me.

      It is not even a financing operation per se. So I can deleverage as much as I want, without even requiring equity financing?

      Am I the only one bothered here?

      Thanks for your reply @vincentt

    • vincentt
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      The following formula should help you understand better.

      RE = Beginning RE + Net Income – Dividends

      Apart from RE in the “Equity” section, there is also Common Stock.

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