Bonds with Detachable Warrants

Question 1

If bonds are sold with nondetachable warrants, how are proceeds allocated?

Answer 1

-All to bonds, none to warrants

Question 2

How do we record issuance of bonds with detachable warrants?

Answer 2

• Based on relative Fair Values

- If only one security has FV quote, incremental proceeds allocated to second security

Question 3

What’s the primary difference between IFRS and GAAP in accounting for compound securities?

Answer 3

-IFRS allocates total price of compound security to debt first, remainder to equity