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In this video tutorial, the presenter explains how to account for convertible debt under IFRS, highlighting the differences from U.S. GAAP. Convertible debt comprises two components: the debt obligation (e.g., a promise to pay $1,000 in five to ten years) and the conversion feature (the option to convert the debt into common or preferred shares). IFRS requires these components to be separated, with the debt recorded as a liability and the conversion feature recognized as equity. The presentation introduces the residual method to achieve this bifurcation, which involves determining the fair value of the convertible debt at the issuance date to allocate values between debt and equity appropriately.