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Chapter 3

2.2 Convertible loan initial recognition
Step 2 – PV of cash flows X
Step 3 – Equity X β
–––
Step 1 – Cash from loan X
–––

Journal to record convertible loan

Dr Cash (from step 1)

Cr Liability (from step 2)

Cr Equity (from step 3)

The accounting treatment above illustrates the INITIAL recognition of
the convertible loan only.

The liability would be subsequently treated at amortised cost (see
section 3.3).

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