(b) Does the change in interest rates since the issuance of these notes affect the...
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Accounting
b Does the change in interest rates since the issuance of these notes affect the amount of interest expense that Deere reports in its income statement? Explain.
Yes, the decline in interest rates results in a decline in interest expense.
Because accounting is inherently conservative, declines in interest rates are not reflected in a reduction of interest expense. However, the increase in interest expense resulting from an increase in rates is recognized.
No the change in interest rates since Deere issued the notes does not affect interest expense.
The change in interest rates only affects the required payment on the liability and, thus, cash flow.
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