Company A issued convertible notes 3 years ago and accounted for them as a compound financial instrument. Complete the following:
At the end of the three year period the portion of the XXX component that relates to the notes which have been converted XXX.
A) equity, is transferred to profit and loss.
B) liability, remains as a liability.
C) liability, is transferred to equity.
D) liability, is transferred to profit or loss.

Question

Company A issued convertible notes 3 years ago and accounted for them as a compound financial instrument. Complete the following:
At the end of the three year period the portion of the XXX component that relates to the notes which have been converted XXX.
A) equity, is transferred to profit and loss.
B) liability, remains as a liability.
C) liability, is transferred to equity.
D) liability, is transferred to profit or loss.

Quizplus · Accepted Answer

When convertible notes are accounted as a compound financial instrument, the debt element (liability) and the equity element (conversion option) are separated. At the end of the conversion period, if the notes are converted into equity, the corresponding liability component should be transferred to equity.

Company a Issued Convertible Notes 3 Years Ago and Accounted