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Principal amount
|
$1,000
|
Coupon rate
|
5% paid semi-annually on June 30 and December 31
|
Years to maturity
|
5 years
|
Conversion price
|
$100
|
Number of shares underlying conversion option
|
10
|
Dr. Cash |
$1,000 |
|
Cr. Debt host instrument |
$800 |
|
Cr. Derivative liability (separated conversion option) |
$200 |
Dr. Loss on derivative liability
|
$180 |
|
Dr. Interest expense (amortization of discount)
|
$32 |
|
Cr. Debt host instrument
|
$32 |
|
Cr. Derivative liability
(separated conversion option)
|
$180 |
Dr. Derivative liability (separated conversion option)
|
$280 |
|
Cr. Gain on derivative liability
|
$280 |
Dr. Debt host instrument
|
$832 |
|
Dr. Derivative liability
(separated conversion option) |
$100 |
|
Dr. Loss on debt extinguishment
|
$168 |
|
Cr. Cash
|
$1,100 |
If an embedded conversion option in a convertible debt instrument no longer meets the bifurcation criteria in this Subtopic, an issuer shall account for the previously bifurcated conversion option by reclassifying the carrying amount of the liability for the conversion option (that is, its fair value on the date of reclassification) to shareholders’ equity. Any debt discount recognized when the conversion option was bifurcated from the convertible debt instrument shall continue to be amortized.
If a holder exercises a conversion option for which the carrying amount has previously been reclassified to shareholders’ equity pursuant to paragraph 815-15-35-4, the issuer shall recognize any unamortized discount remaining at the date of conversion immediately as interest expense.
If a convertible debt instrument with a conversion option for which the carrying amount has previously been reclassified to shareholders’ equity pursuant to the guidance in paragraph 815-15-35-4 is extinguished for cash (or other assets) before its stated maturity date, the entity shall do both of the following:
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