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

Question

Quizplus · Accepted Answer

Compound instruments are split into their separate components (e.g., liability and equity elements), and each component is then accounted for according to what it actually represents, following the relevant accounting standards for that type of financial instrument.

Which Statement Best Explains the Accounting for Compound Instruments