The financial accounting terms registered and bearer bonds refer to the indication and method of ownership associated with the security. With registered bonds, the owner's name and contact information is kept on file with the issuing company. Bearer bonds do not have registered owners on file with the issuing company, and are considered owned by whoever is in possession of the certificate.
Since both registered and bearer bonds are usually issued for a term of five years or more, they represent a long term obligation of the company, and are shown in the long term liabilities section of the balance sheet.
Issuing long-term bonds represents an important source of financing for many large companies. Both registered and bearer bonds typically carry maturities of five years or longer, and are classified as long-term debt obligations.
The terms "registered" and "bearer" refer to the record of ownership as explained below:
- Registered Bonds: includes debt obligations that have the owner's name and contact information on file at the issuing company. This allows the company to provide interest and maturity payments directly to the registered owner. Certificate bonds are printed documents that contain the owner's name on the certificate. If held this way, the owner must sign the certificate to transfer ownership. Electronic bonds are the preferred approach today, and change in ownership can be achieved over the phone, through the mail, or via a website.
- Bearer Bonds: includes debt obligations that do not have the owner's name and contact information on file at the issuing company. In order to receive an interest payment, the holder of the bond would mail a coupon to the issuing company. In today's electronic age, bearer bonds are becoming far less common but may be preferred by investors wishing to remain somewhat anonymous. If lost or stolen, these bonds provide no protection to their rightful owners.
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