- 4 Marks
CR – Nov 2020 – L3 – Q3b – Convertible Loan Accounting under IFRS 9
Accounting treatment of investment in a convertible bond under IFRS 9.
Question
During the year ended 31 December 2018 Pakyi Ltd invested in a convertible bond on its issue date. The bond matures four years after the issue date and at that date the bond can be converted into ordinary shares of the investee or repaid at par. The entity’s plan for the bond is to hold it until it matures and collect the cash flows.
Required:
Advise the directors of Pakyi Ltd of the accounting treatment on the above transaction under IFRS 9: Financial Instruments for the year ended 31 December 2018.
(4 marks)
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