Mawuena Ltd issued 1500 convertible loan note at par on 1st January 2015. The loan notes are redeemable in four years’ time at their par value of GH¢ 200 per note. The loan note pays interest annually in arrears at an interest rate of 8%. Each loan note can be converted at the maturity date into 10 GH¢ 1 shares. The effective interest rate for four year loan notes with no right of conversion is 12% and the risk-free annual interest rate for a four-year term is 7%. Required Show how the loan note should be treated in the financial statement of Mawuena Ltd in accordance with IFRS 9 Financial Instrument
Mawuena Ltd issued 1500 convertible loan note at par on 1st January 2015. The loan notes are redeemable in four years’ time at their par value of GH¢ 200 per note. The loan note pays interest annually in arrears at an interest rate of 8%. Each loan note can be converted at the maturity date into 10 GH¢ 1 shares. The effective interest rate for four year loan notes with no right of conversion is 12% and the risk-free annual interest rate for a four-year term is 7%. Required Show how the loan note should be treated in the financial statement of Mawuena Ltd in accordance with IFRS 9 Financial Instrument
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Mawuena Ltd issued 1500 convertible loan note at par on 1st January 2015. The loan notes
are redeemable in four years’ time at their par value of GH¢ 200 per note. The loan note pays interest annually in arrears at an interest rate of 8%. Each loan note can be converted at the maturity date into 10 GH¢ 1 shares. The effective interest rate for four year loan notes with
no right of conversion is 12% and the risk-free annual interest rate for a four-year term is 7%.
Required
Show how the loan note should be treated in the financial statement of Mawuena Ltd in accordance with IFRS 9 Financial Instrument
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