What is a bond sinking fund?
A bond sinking fund is similar to restricted cash in the sense that the company must put aside to buy back bonds that the company had issued. A separate trustee would hold the cash for the company, which is why it is labeled as restricted cash. The company would classify the bond sinking fund as a non-current asset on its balance sheet.
Basically, its just cash set aside by the company to cover any bond payments it would need to make to holders of the bonds.
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What is restricted cash?
Restricted cash represents cash that has been set aside for a specified use is considered to be restricted. This can consist of acquisition of large fixed income items. Restricted cash may be related to both current and noncurrent assets. The restricted cash will be booked as a current asset if it is related to a […]
What are non-current assets?
Items typically classified as non-current include land, buildings, machinery, equipment, leasehold improvements, goodwill, intangible assets (patents, copyrights, trademarks). These items typically have a lifespan of more than one-year.