On 1st April, 20X1, S Ltd. issued 30,000 6% convertible debentures of face value of 100 per debenture at par. The debentures are redeemable at a…

CA Final · Financial Reporting · MTP · January 2026
On 1st April, 20X1, S Ltd. issued 30,000 6% convertible debentures of face value of 100 per debenture at par. The debentures are redeemable at a premium of 10% on 31st March 20X5 or these may be converted into ordinary shares at the option of the holder. The interest rate for equivalent debentures without conversion rights would have been 10%. The date of transition to Ind AS is 1st April 20X3. Analyze the transactions mentioned above and choose the most appropriate option in the below questions 14 and 15 in line with relevant Ind AS:
(A) Since the liability is outstanding on the date of transition, S Ltd. will need to split the convertible debentures into debt and equity portion on the date of transition.
(B) Since the liability is outstanding on the date of transition, S Ltd. will not split the convertible debentures into debt and equity portion on the date of transition.
(C) The entire outstanding amount will be recognised as equity on the date of transition as these may be converted into ordinary shares.
(D) On the date of transition, the outstanding amount will be considered as repaid immediately.

Suggested Answer and Working Notes:

Correct Answer: Option (A)

Since the liability is outstanding on the date of transition, S Ltd. will need to split the convertible debentures into debt and equity portion on the date of transition.

Topics: Ind AS 110, Ind AS 101

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