Izmir A.S. issued convertible bonds at their face value of 100,000 lira on December 31, 2017. The

Question:

Izmir A.S. issued convertible bonds at their face value of 100,000 lira on December 31, 2017. The bonds have a 10-year life with interest of 10 percent payable annually. At the date of issue, the prevailing interest rate for similar debt without a conversion option was 12 percent.

Determine the appropriate accounting for this compound financial instrument for the year ending December 31, 2017, under (1) IFRS and (2) U.S. GAAP.

Prepare the entry(ies) that the U.S. parent would make on the December 31, 2017, conversion worksheet to convert IFRS balances to U.S. GAAP.

Face Value
Face value is a financial term used to describe the nominal or dollar value of a security, as stated by its issuer. For stocks, the face value is the original cost of the stock, as listed on the certificate. For bonds, it is the amount paid to the...