FASB ASC 470 contains GAAP requirements for the initial recording of convert-ible debt. These debt instruments have

Question:

FASB ASC 470 contains GAAP requirements for the initial recording of convert-ible debt. These debt instruments have either beneficial conversion features or conversion features that are not beneficial.

Required:

a. When does a convertible bond have a beneficial conversion feature that is not within the cash conversion subsection of ASC 470? Describe how these bonds are accounted for upon issuance and discuss the rationale for this treatment.

b. Are bonds that do not have a beneficial conversion feature accounted for in the same manner as those that do? If not, how and why are they accounted for differently?

GAAP
Generally Accepted Accounting Principles (GAAP) is the accounting standard adopted by the U.S. Securities and Exchange Commission (SEC). While the SEC previously stated that it intends to move from U.S. GAAP to the International Financial Reporting Standards (IFRS), the...