Compound Financial Instruments

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..... all be classified separately as financial liabilities, financial assets or equity instruments. Measurement - The issuer of a bond convertible into ordinary shares first determines the carrying amount of the liability component by measuring the fair value of a similar liability (including any embedded non-equity derivative features) that does not have an associated equity component. The carryi .....

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..... ing Treatment Following Steps need to follow for accounting of Compound Financial Instrument: - Step 1 - Compound Financial instrument has to measure in initial recognition in 2 parameters Financial Liability Component Equity Instrument Component For Financial Liability Component Present Value of future cash flows in the nature of Financial Liability discounted using market .....

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..... onent to be measure at amortised cost method. Step 4 On maturity date If it is converted into Equity Shares Debenture (FL) XXX Debentures (Equity) XXX To Equity Shares Capital XXX To Securities Premium XXX If it is redeemed in cash Debenture (FL) XXX To Bank XXX Debentures (Equity) XXX To Retained earnings XXX - Manual .....

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