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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

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

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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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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