Under IFRS, a convertible debt security is recorded as a debt instrument
A) with the equity feature ignored.
B) with the equity feature described in a note.
C) and an equity component.
D) with the conversion component credited to the Common Shares account.

Question

Quizplus · Accepted Answer

Under IFRS, a convertible debt security is recorded as a debt instrument with an equity component. The equity component represents the fair value of the conversion option, which is the difference between the fair value of the convertible bond and the fair value of the non-convertible bond. This equity component is recognized separately in the financial statements.

Under IFRS, a Convertible Debt Security Is Recorded as a Debt