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Hi Sir,
Please could you explain why this is not a true statement: “Including a convertible loan note in equity on the basis that the holders are likely to choose the equity option on conversion is an example of faithful representation”
Thanks,
Hi,
This is because all convertible loan notes are treated as compound instruments where we use split accounting. This happens regardless of the intention of the holders. The faithful representation is shown by using split accounting and recognising both debt and equity.
Thanks
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