Public Sector Accounting Assignment

Published on March 2017 | Categories: Documents | Downloads: 45 | Comments: 0 | Views: 329
of 6
Download PDF   Embed   Report

Comments

Content

Appropriation Bill
Legislation that authorizes the government to spend money from the public treasury for a certain purpose. For example, an appropriation bill may enable the defense ministry to fund the military's activities for the year. If the amount authorized in all appropriation bills in a year exceeds the revenue the government collects, then the government goes into deficit. In many countries, appropriation bills must originate in the lower house of the legislature. Appropriation Act An Appropriation Act is an Act of Parliament passed by the United Kingdom Parliament which, like a Consolidated Fund Act, allows the Treasury to issue funds out of the Consolidated Fund. Unlike a Consolidated Fund Act an Appropriation Act also "appropriates" the funds, that is allocates the funds issued out of the Consolidated Fund to individual government departments and Crown bodies.[1] Each Appropriation Act has a series of schedules which contain tables that set out how the monies issued out of the Consolidated Fund are appropriated. Each department or body which has money appropriated is noted in the tables which contain columns setting out the things the money appropriated may be spent on, the net resources authorised for use, the grants out of the Consolidated Fund, the operating appropriations in aid and the non-operating appropriations in aid. The money may not be spent for purposes other than that it is appropriated for and it must be spent by the end of the fiscal year covered by that appropriation or returned to the Consolidated Fund.[1] The typical structure of such an act begins with the long title, which defines which financial years the act applies to. This is followed by the preamble, which is different from the normal British public general Act of Parliament preamble in that it includes additional text before the normal preamble:[citation needed] Whereas the Commons of the United Kingdom in Parliament assembled have resolved to authorise the use of resources and the issue of sums out of the Consolidated Fund towards making good the supply which they have granted to Her Majesty in this Session of Parliament:— Be it therefore enacted by the Queen's most Excellent Majesty, by and with the advice and consent of the Lords Spiritual and Temporal, and Commons, in this present Parliament assembled, and by the authority of the same, as follows:— Until 2000 an older form of preamble was used:[citation needed] Most Gracious Sovereign, WE, Your Majesty's most dutiful and loyal subjects, the Commons of the United Kingdom in Parliament assembled, towards making good the supply which we have cheerfully granted to Your Majesty in this Session of Parliament, have resolved to grant unto Your Majesty the sums hereinafter mentioned; and do therefore most humbly beseech Your Majesty that it may be enacted and be it enacted by the Queen's most Excellent Majesty, by and with the advice and consent of the Lords Spiritual and Temporal, and Commons, in this present Parliament assembled, and by the authority of the same, as follows:—

Each Appropriation Act typically covers two or more fiscal years, and will normally repeal earlier Appropriation Acts and Consolidated Fund Acts still on the statute books.[1] The HIPC program was initiated by the International Monetary Fund and the World Bank in 1996, following extensive lobbying by NGOs and other bodies. It provides debt relief and lowinterest loans to cancel or reduce external debt repayments to sustainable levels. To be considered for the initiative, countries must face an unsustainable debt burden which cannot be managed with traditional means.[1] Assistance is conditional on the national governments of these countries meeting a range of economic management and performance targets.[which?] As of September 2009, the HIPC program had identified 40 countries (29 of which are in SubSaharan Africa) as being potentially eligible to receive debt relief. The 35 countries that have so far received full or partial debt relief are:[1] *) indicates the seven countries yet to reach completion point for the HIPC program, and therefore entitled only to partial debt relief. The remaining 24 countries have completed the program and had their external debt cancelled in full.[1][2] An additional four countries (Eritrea, Kyrgyz Republic, Somalia and Sudan) are being considered for entry into the program. To receive debt relief under HIPC, a country must first meet HIPC's threshold requirements. At HIPC's inception in 1996, the primary threshold requirement was that the country's debt remains at unsustainable levels despite full application of traditional, bilateral debt relief. At the time, HIPC considered debt unsustainable when the ratio of debt-to-exports exceeded 200-250% or when the ratio of debt-to-government revenues exceeded 280%.[3]

[edit] Funding
The IMF estimates that the total cost of providing debt relief to the 40 countries currently eligible for the HIPC program to be around $71 billion (in 2007 dollars).[1] Half of the funding is provided by the IMF, World Bank, and other multilateral organizations, while the other half is provided by the creditor countries. The IMF's share of the cost is currently being funded by the proceeds of gold sales by the organization in 1999, but it estimated that this will not be enough to cover the full cost, and further funding will need to be raised if additional countries such as Sudan and Somalia meet the qualification requirements for entry into the program.[1] In finance, a warrant is a security that entitles the holder to buy the underlying stock of the issuing company at a fixed exercise price until the expiry date. Warrants and options are similar in that the two contractual financial instruments allow the holder special rights to buy securities. Both are discretionary and have expiration dates. The word warrant simply means to "endow with the right", which is only slightly different than the meaning of option.

Warrants are frequently attached to bonds or preferred stock as a sweetener, allowing the issuer to pay lower interest rates or dividends. They can be used to enhance the yield of the bond, and make them more attractive to potential buyers. Warrants can also be used in private equity deals. Frequently, these warrants are detachable, and can be sold independently of the bond or stock. In the case of warrants issued with preferred stocks, stockholders may need to detach and sell the warrant before they can receive dividend payments. Thus, it is sometimes beneficial to detach and sell a warrant as soon as possible so the investor can earn dividends. Warrants are actively traded in some financial markets such as Deutsche Börse and Hong Kong.[1] In Hong Kong Stock Exchange, warrants accounted for 11.7% of the turnover in the first quarter of 2009, just second to the callable bull/bear contract.[2]

Structure and features
Warrants have similar characteristics to that of other equity derivatives, such as options, for instance:


Exercising: A warrant is exercised when the holder informs the issuer their intention to purchase the shares underlying the warrant.

The warrant parameters, such as exercise price, are fixed shortly after the issue of the bond. With warrants, it is important to consider the following main characteristics:
 





Premium: A warrant's "premium" represents how much extra you have to pay for your shares when buying them through the warrant as compared to buying them in the regular way. Gearing (leverage): A warrant's "gearing" is the way to ascertain how much more exposure you have to the underlying shares using the warrant as compared to the exposure you would have if you buy shares through the market. Expiration Date: This is the date the warrant expires. If you plan on exercising the warrant you must do so before the expiration date. The more time remaining until expiry, the more time for the underlying security to appreciate, which, in turn, will increase the price of the warrant (unless it depreciates). Therefore, the expiry date is the date on which the right to exercise ceases to exist. Restrictions on exercise: Like options, there are different exercise types associated with warrants such as American style (holder can exercise anytime before expiration) or European style (holder can only exercise on expiration date).[3]

Warrants are longer-dated options and are generally traded over-the-counter.

Types of warrants
A wide range of warrants and warrant types are available. The reasons you might invest in one type of warrant may be different from the reasons you might invest in another type of warrant.


Equity warrants: Equity warrants can be call and put warrants.



 

  

Callable warrants: Callable warrants give the Company the right to force the warrant holder to exercise the warrants into their predetermined number of shares at a predetermined price (or using a predetermined price formula) after certain contractual conditions are met o Putable warrants: Putable warrants give the warrant holder the right to force the Company to issue the underlying securities at a predetermined price after certain contractual conditions are met Covered warrants: A covered warrants is a warrant that has some underlying backing, for example the issuer will purchase the stock beforehand or will use other instruments to cover the option. Basket warrants: As with a regular equity index, warrants can be classified at, for example, an industry level. Thus, it mirrors the performance of the industry. Index warrants: Index warrants use an index as the underlying asset. Your risk is dispersed— using index call and index put warrants—just like with regular equity indexes. It should be noted that they are priced using index points. That is, you deal with cash, not directly with shares. Wedding warrants: are attached to the host debentures and can be exercised only if the host debentures are surrendered Detachable warrants: the warrant portion of the security can be detached from the debenture and traded separately. Naked warrants: are issued without an accompanying bond, and like traditional warrants, are traded on the stock exchange.

o

[edit] Traditional

Traditional warrants are issued in conjunction with a Bond (known as a warrant-linked bond), and represent the right to acquire shares in the entity issuing the bond. In other words, the writer of a traditional warrant is also the issuer of the underlying instrument. Warrants are issued in this way as a "sweetener" to make the bond issue more attractive, and to reduce the interest rate that must be offered in order to sell the bond issue.
[edit] Example
    

Price paid for bond with warrants P0 Coupon payments C Maturity T Required rate of return r Face value of bond F

Value of warrants = [edit] Naked

Naked warrants are issued without an accompanying bond, and like traditional warrants, are traded on the stock exchange. They are typically issued by banks and securities firms. These are also called covered warrants, and are settled for cash, e.g. do not involve the company who

issues the shares that underlie the warrant. In most markets around the world, covered warrants are more popular than the traditional warrants described above. Financially they are also similar to call options, but are typically bought by retail investors, rather than investment funds or banks, who prefer the more keenly priced options which tend to trade on a different market. Covered warrants normally trade alongside equities, which makes them easier for retail investors to buy and sell them.
[edit] Third-party warrants

Third-party warrant is a derivative issued by the holders of the underlying instrument. Suppose a company issues warrants which give the holder the right to convert each warrant into one share at $500. This warrant is company-issued. Suppose, a mutual fund that holds shares of the company sells warrants against those shares, also exercisable at $500 per share. These are called third-party warrants. The primary advantage is that the instrument helps in the price discovery process. In the above case, the mutual fund selling a one-year warrant exercisable at $500 sends a signal to other investors that the stock may trade at $500-levels in one year. If volumes in such warrants are high, the price discovery process will be that much better; for it would mean that many investors believe that the stock will trade at that level in one year. Third-party warrants are essentially long-term call options. The seller of the warrants does a covered call-write. That is, the seller will hold the stock and sell warrants against them. If the stock does not cross $500, the buyer will not exercise the warrant. The seller will, therefore, keep the warrant premium.

[edit] Traded warrants

Finance
The study of money and how it is used. Finance considers the relationship of money to time and risk. One of the main subsets of finance is the study of credit and banking, as this involves money, time, and risk all together. Finance may deal with personal or corporate issues, such as how will an individual or company acquires the money needed to perform a certain act.

Encumbrance
1. A liability on real property. For example, a mortgage encumbers title to real estate because the lender has an interest in the property. Compare unencumbered. 2. A commitment within an organization to use funds for a specific purpose. Thus, a college may encumber funds for later payment to cover expenses associated with a faculty member's trip to recruit new professors.

Finance" is often defined simply as the management of money or “funds” management [1]
Modern finance, however, is a family of business activity that includes the origination, marketing, and management of cash and money surrogates through a variety of capital accounts,

instruments, and markets created for transacting and trading assets, liabilities, and risks. Finance is conceptualized, structured, and regulated by a complex system of power relations within political economies across state and global markets. Finance is both art (e.g. product development) and science (e.g. measurement), although these activities increasingly converge through the intense technical and institutional focus on measuring and hedging risk-return relationships that underlie shareholder value. Networks of financial businesses exist to create, negotiate, market, and trade in evermore-complex financial products and services for their own as well as their clients’ accounts. Financial performance measures assess the efficiency and profitability of investments, the safety of debtors’ claims against assets, and the likelihood that derivative instruments will protect investors against a variety of market risks [2] The financial system consists of public and private interests and the markets that serve them. It provides capital from individual and institutional investors who transfer money directly and through intermediaries (e.g. banks, insurance companies, brokerage and fund management firms) to other individuals, firms, and governments that acquire resources and transact business. With the expectation of reaping profits, investors fund credit in the forms of (1) debt capital (e.g. corporate and government notes and bonds, mortgage securities and other credit instruments), (2) equity capital (e.g. listed and unlisted company shares), and (3) the derivative products of a wide variety of capital investments including debt and equity securities, property, commodities, and insurance products. Although closely related, the disciplines of economics and finance are distinctive. The “economy” is a social institution that organizes a society’s production, distribution, and consumption of goods and services,” all of which must be financed. Economists make a number of abstract assumptions for purposes of their analyses and predictions. They generally regard financial markets that function for the financial system as an efficient mechanism. In practice, however, emerging research is demonstrating that such assumptions are unreliable. Instead, financial markets are subject to human error and emotion [3] New research discloses the mischaracterization of investment safety and measures of financial products and markets so complex that their effects, especially under conditions of uncertainty, are impossible to predict. The study of finance is subsumed under economics as finance economics, but the scope, speed, power relations and practices of the financial system can uplift or cripple whole economies and the well-being of households, businesses and governing bodies within them— sometimes in a single day.

Encumbrance is legal technical terminology for anything that affects or limits the title of a
property, such as mortgages, leases, easements, liens, or restrictions. Also, those considered as potentially making the title defeasible are encumbrances. For example, charging orders, building orders and structure alteration.

Sponsor Documents

Or use your account on DocShare.tips

Hide

Forgot your password?

Or register your new account on DocShare.tips

Hide

Lost your password? Please enter your email address. You will receive a link to create a new password.

Back to log-in

Close