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in this video im going to show you how to account for convertible debt according to ifrs so international accounting standards are different than u.s gaap in that you need to separate the two components of the convertible debt youve got the debt itself so lets say theres a promise to pay a thousand dollars in five or ten years and then youve got the conversion feature the option right the option to convert to common shares or preferred shares something to convert to some other type of security okay so youve got this convertible debt the question is how do we bifurcate how do we separate these two components because ifrs says were going to have debt and then this is going to be equity okay so the conversion feature is going to be accounted for as equity so were going to use something called the residual method and thats going to require us to do this were going to take the fair value of the convertible debt on the date of issuance okay so the date that this uh debt is issued
