Problem on effective interest method

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Reference no: EM13136973

In its 2009 annual report to shareholders, Bare Sturns Group Inc. disclosed the following:

On October 28, 2009, the Company issued $475,000,000 aggregate principal amount of 9-1/4% Senior Notes Due 2014 ("Senior Notes") and $618,670,000 aggregate principal amount at maturity of 10-1/4% Senior Discount Notes Due 2014 ("Senior Discount Notes" and collectively the "Notes") in a transaction not registered under the Securities Act in reliance upon an exemption from the registration requirements of the Securities Act. Gross proceeds from the offering amounted to $850,000,000. The discount on the Senior Discount Notes is being accreted under the effective interest method.

Explain the last sentence of the disclosure to clarify what accounting was necessary and why?

Reference no: EM13136973

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