Financial instruments problem

WHEN A COMPANY ISSUES THE DEBT HE IS GIVING SOME ADDIIONAL FEATURE TO THE MEMBERS LIKE OPTION TO CONVERT THEM INTO EQUITY OR SHAREHOLDERS FUND OR OTHER BENEFIT WHICH ACCRUE TO THE DEBT HOLDER.

SINCE COMPANY IS ISSUING DEBT HAVING SOME EXTRA FEATURE THAN OTHER DEBTS IN MARKET THE RATE AT WHICH IT ISSUES THE DEBT IS ALWAYS LESS THAN THAT PREVALLING IN THE MARKET SINCE MARKET DEBT ARE NOT HAVING ADDITIONAL BENEFITS OTHER THAN INTEREST.

SO WE USE THE RATE PREVAILING IN THE MARKET FOR A NORMAL OR SIMILAR DEBT INSTRUMENT SO THAT WE CAN RECOGNISE OUR LIABILITY IN A FAIR VALUR AND OUR FINANCIAL STATEMENTS ARE NOT MISSTATED.

HOPE U GOT MY POINT.

IF NOT, PLS REPLY.

BECAUSE FOR THE EQUITY PORTION WE DONT NEED TO PAY CASH WE WILL HAVE TO ALLOT SHARES.

AND FOR THE RECOGNITION OF FINANCIAL LIABILTY UNDER AS-30,31,32 SETTLEMENT OF LIABILITY MUST LEAD TO OUTFLOW OF CASH WHICH IS NOT IN THE CASE OF EQUITY.

HENCE EQUITY ARE NOT RECOREDE AS LIABILITY