Compound instruments
In this lesson, you'll learn how to account for compound instruments—a key requirement under IAS 32. Compound instruments like convertible debt have both liability and equity characteristics, and you must split and present them separately based on their substance.
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In this lesson
- 0:00 Compound instruments and convertible debt
- 0:39 Initial recognition and liability valuation
- 1:25 Worked example: Gold Company bonds
- 2:05 Calculating present value of liability
- 3:10 Equity component and financial statement presentation
About this lesson
You'll discover how to calculate the liability component using the present value of cash repayments discounted at the market rate for similar non-convertible instruments, and how the equity component is the residual amount. Through a worked example involving convertible bonds, you'll see how to apply this methodology step-by-step, ensuring you can confidently handle compound instruments in your Financial Reporting or Advanced Financial Reporting exams.
Duration: 4m
Transcript
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