Transcription of IFRS IN PRACTICE
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IFRS IN PRACTICE
IFRS IN PRACTICEA ccounting for convertible notes2 IFRS IN PRACTICE - ACCOUNTING FOR CONVERTIBLE NOTESTABLE OF CONTENTSI ntroduction 3 The basic requirements of IFRSs 4 Example 1 Convertible note in its simplest form 7 Transaction costs 8 Deferred taxes 9 Early conversion 9 Early repurchase 9 Modification to encourage early conversion 9 Example 2 Convertible notes with an embedded derivative liability 10 Transaction costs 12 Derivative liability 12 Scenarios where the conversion feature fails equity classification 13 Ratchet feature 13 Convertible note denominated in a foreign currency 13 Variable conversion price limited to cap and/or a floor 13 Scenarios where the conversion feature still meets equity classification 14 Loyalty bonus issues 14 Adjustments from a stock split or bonus issue 14 Other common PRACTICE issues 15 Conversion price based on the issuer s share price at conversion date 15 Fair value o
loss volatility. This means that the effect on a number of related arrangements needs to be considered, including: – Other lending agreements, including the effect on key ratios and covenants – Employee remuneration arrangements, including bonus schemes linked to reported profits and share-based payments – Investor communications.
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