D is corrent. IFRS provides that financial instruments with characteristics of both debt and equity are compound instruments and must be separated into its respective components. The liability is valued at the fair value at the date of issuance and the residual value is assigned to the equity component. Therefore, the bond should be recorded at its fair value of $580,000, and an equity component should be recorded for $20,000.
A is incorrect. IFRS requires the compound instrument to be separated into its respective components.
B is incorrect. IFRS provides that financial instruments with characteristics of both debt and equity are compound instruments and must be separated into its respective components. The liability is valued at the fair value at the date of issuance and the residual value is assigned to the equity component. Therefore, the bond should be recorded at its fair value of $580,000, and an equity component should be recorded for $20,000.
B is incorrect. IFRS provides that financial instruments with characteristics of both debt and equity are compound instruments and must be separated into its respective components. The liability is valued at the fair value at the date of issuance and the residual value is assigned to the equity component. Therefore, the bond should be recorded at its fair value of $580,000, and an equity component should be recorded for $20,000.
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