How should a reporting entity account for the fair value of a compound instrument?
Debt Component Equity Component

Question

Quizplus · Accepted Answer

When a compound instrument has a debt component that is cash-settled and an equity component that is equity-settled (i.e. convertible bond with a fixed conversion ratio), the fair value of the equity component is initially recognized in equity as a separate component of the transaction, while the fair value of the debt component is recognized as a liability. Subsequently, changes in the fair value of the equity component are recognized in equity, while changes in the fair value of the liability component are recognized in profit or loss.

How Should a Reporting Entity Account for the Fair Value