How would the liability portion of the compound instrument be recorded?
A)Once separated, this component is accounted for at fair value with changes recorded through income.
B)Once separated, this component is accounted for in accordance with its substance.
C)Once separated, this component is accounted for at amortized cost.
D)Once separated, this component is accounted for at historical cost.

Question

Quizplus · Accepted Answer

Once separated, the liability component of a compound financial instrument is accounted for at amortized cost. This approach reflects the entity's obligation to pay cash or another financial asset over time, and amortized cost is a method that allocates the amount to be repaid over the relevant period up to the redemption of the liability.

How Would the Liability Portion of the Compound Instrument Be