CERTYNEX IFRS ACADEMY

A colleague summarises the treatment of an interest-bearing bond convertible into a fixed number of shares. Which of the colleague's sentences is wrong?

The split is made at initial recognition, and the two components are recognised separately from each other.

The bond has both liability characteristics, with its interest and repayment, and equity characteristics, with its conversion option.

The split results in a financial liability for the debt part of the instrument and an equity instrument for the conversion option.

The bond is recognised entirely as debt until conversion, the equity component appearing only at that time.