Classification, Measurement, and Recognition of Convertible Bonds Under Ind AS Framework
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- By Taxmann
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- Last Updated on 27 February, 2025
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This document examines the classification, measurement, and recognition of convertible bonds under the Ind AS framework, focusing on a case where a company issued convertible bonds but recognized the entire proceeds as a liability without accounting for the equity component. It discusses whether this treatment complies with Ind AS 32 and Ind AS 109, which require split accounting for compound financial instruments.
The document analyzes key Ind AS provisions, including how a liability component should be measured and whether an equity component must be recognized separately. It raises concerns about whether failing to discount the liability component impacts financial reporting accuracy and violates Ind AS requirements. Additionally, it outlines the necessary steps for initial recognition and subsequent measurement, highlighting whether the company’s approach aligns with proper accounting practices.
By referencing journal entries and valuation methods, the document evaluates whether the company’s accounting treatment followed by the company aligns with the relevant accounting standards.
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