<Chapter 16. Dilutive Securities and Earnings per Share>-Objective 1. The accounting for the insurance, conversion and retirement of convertiblesecuritiesP&G did not issue any convertible bonds in fiscal year of 2009. Instead of convertible bond, P&G issued convertible preferred stocks amount of 1,323 millions. It has same privilege of exchanging it for stocks at the holder’s option. P&G issued convertibles for two main reasons, one is to raise equity capital without giving up more ownership control than necessary and second reason is to obtain debt financing at cheaper rates, because of convertible covenant.-Objective 2. The Accounting for convertible preferred stockThe major difference between accounting for a convertible bond and convertible preferred stock at the date of issue is their classification: Convertible bonds are considered liabilities, whereas convertible preferred are considered part of stockholders’ equity. Also, companies do not recognize a gain or loss when stockholders exercise convertible preferred stock. P&G
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