Naniama Ltd issued 3,000 convertible bonds at par. The bonds are redeemable in 4 years’ time at their par value of GH¢100 per bond. The bonds pay interest annually in arrears at an interest rate (based on nominal value) of 5%. Each bond can be converted at the maturity date into 5 GH¢1.00 shares. The prevailing market interest rate for four year bonds that have no right of conversion is 8%.
The present value at 8% of GH¢1 receivable at end of:
Required:
Show the initial accounting treatment of the bond in accordance with International Financial Reporting Standards (IFRS). (5 marks)
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Naniama Ltd. GHC
