What is the accounting treatment of Convertible bonds which are redeemable by issuing variable number of equity instruments ?
Should it be considered as embeded derivative ?
(from issuer's point of view)
These are not embedded derivatives, but financial liabilities. IndAS does not consider hedge accounting for derivatives like futures and options not unless a standard requires to or permits it.
Bank a/c
To Bond liability a/c
when you issue shares on redemption date instead of cash, it should be like derecognise liability and
Bond liability a/c
To Share Capital a/c
Here, Share Capital is credited because, Share are issued to bond holder. Then, bank is not adjusted because, the liability to pay cash through share settlement is still existing.
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