Financial statement users must recognize that interest expense may seriously

Question

Quizplus · Accepted Answer

Interest expense may be understated when convertible debt is used because the issuer has the option to convert the debt into equity. This means that the issuer may not be required to pay interest if the debt is converted, resulting in a lower true cost of debt financing. Therefore, financial statement users should be aware of the potential impact of convertible debt on interest expense.

Financial Statement Users Must Recognize That Interest Expense May Seriously