bond discount

Bond discount

The difference by which a bond's market price is lower than its face value. The antithesis of a bond premium, which prevails when the market price of a bond is higher than its face value. See: Original issue discount.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

Bond Discount

A situation in which a bond's market value is lower than its face value. Short-term bonds are often issued at a bond discount, especially if they are zero-coupon bonds. However, bonds on the secondary market may trade at a bond discount, which occurs when supply exceeds demand. A bond discount is likely when the issuer has poor or recently downgraded credit, or when current interest rates are higher than the bond's. See also: Unamortized bond discount.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

bond discount

Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.
References in periodicals archive ?
Other material non-cash charges were recorded for depreciation, depletion and amortisation ('DD&A') amounting to US$24.7 million and US$10.0 million for non-cash accretion of bond discount, lease liability and decommission provisions.
* Measuring liabilities using a discount rate (investment return assumption) based on a high-grade corporate bond discount rate of 5.5 percent for 2010 and 2011 (this differs from GASB's permitted use of the plan's investment return assumption until the plan's assets are projected to be exhausted, when a bond-driven discount rate takes effect);
If the bond discount is large, pushing the taxpayer into a higher tax bracket, a more comprehensive strategy may be to sell some bonds before maturity but after the taxpayer has retired and is subject to a lower marginal tax rate.
However, the amount of such a reduction is limited to the interest or interest equivalent (e.g., bond discount) on the bond that is not includable in the donor's income.
Example 3a (bond discount): On January 1, 2007, a trustee purchases 100,000 units of Edsel Motor Co.
For a discount bond, the current yield is more than the coupon rate (7%) but less than the expected yield-to-maturity (8.16%) (the bond discount boosts the total return as the bond is purchased for $959.45 but will mature at $1,000).
He said those in Congress who believe that granting a temporary two-year corporate bond discount favor to defined benefit plan sponsors will create pressure for the needed comprehensive reform of the pension system "have got it backwards."
Note: Receipt of cash does not always represent all of the interest income to be reported for Federal and state income tax purposes; amortization of bond discount is also included.
The resulting bond discount should be amortized under the effective interest method from the issue date to maturity date.
Current GAAP requires that any bond discount or premium be systematically amortized to income.
If P - F < 0, then the absolute value of D is equal to the bond discount and it represents how much less the price of the bond is than its face value.
Temporary differences expected to arise in the future as a result of amortization of bond discount or premium for financial reporting purposes should not be considered in the scheduling process.