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Compound Financial instrument
Financial Reporting
Sir, During the conversion to equity from bond at year end 4 why we have touched the equity component ( Debited the equity ) . The equity recognized at beginning will remain unchanged know.? Video Details ------------- Financial Instruments - FR Financial Assets, Financial Liabilities & Equity #34. Illustration 37
Answers (5)
CA Suraj Lakhotia Admin
The amount is again credited to equity. So in effect to that extent equity is not changed. Its just a reclassification
Sir, therefore, could we pass entry in the following manner also? Convertible Bond (FL) A/c .......... Dr. 1,42,37,376 Convertible Bond (E) A/c [B.F.] .......... Dr. 7,62,624 To Equity Share Capital 1,50,00,000
Denz Philip
Sir, therefore, could we pass entry in the following manner also? Convertible Bond (FL) A/c .......... Dr. 1,42,37,376 Convertible Bond (E) A/c [B.F.] .......... Dr. 7,62,624 To Equity Share Capital 1,50,00,000
The total value is getting replaced by equity share capital. Hence appropriate to convert FL + E to equity share capital + security premium
CA Suraj Lakhotia Admin
The total value is getting replaced by equity share capital. Hence appropriate to convert FL + E to equity share capital + security premium
Okay, sir. But if it was redemption instead of conversion, shouldn't we credit bank, debit FL as on date, and only the balance to E, as shown in illustration 33 [@ 12:27]?
Denz Philip
Okay, sir. But if it was redemption instead of conversion, shouldn't we credit bank, debit FL as on date, and only the balance to E, as shown in illustration 33 [@ 12:27]?
(Updated)
Yes. If it is redemption, the amount credited to equity remains intact as it is.
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