Which statement best explains the accounting for compound instruments?
A)Once separated,each component is accounted for at fair value through profit or loss.
B)Once separated,each component is accounted for in accordance with its substance.
C)Once separated,each component is accounted for amortized cost.
D)Once separated,each component is accounted for at historical cost.

Question

Quizplus · Accepted Answer

Compound financial instruments are split into their separate components (e.g., liability and equity elements), and each component is accounted for based on its substance, not necessarily at fair value or historical cost. This approach allows for the accurate reflection of the financial instrument's nature in the financial statements.

Which Statement Best Explains the Accounting for Compound Instruments