Does anybody know any cases where inducement costs on convertible bond reduce profit?
Hi Ben, When the initial carrying amount of a compound financial instrument is required to be allocated to its equity and liability components, the equity component is assigned the residual amount after deducting from the fair value of the instrument as a whole the amount separately determined for the liability component. [IAS 32.32] Inducement cost on issuing of convertible bond is the transaction cost of the compound financial instrument. Transaction costs related to an issue of a compound financial instrument are allocated to the liability and equity components in proportion to the allocation of proceeds. The portion allocated to the liability will be treated as the difference between the fair value of liability components determined under IAS 32 and the actual proceeds received, (i.e. the discount ) which will being amortized over the term of the bond before the expiry date of the option to convert into common shares expired. The amortized amount will be charged into profit and los
