Groupe Casino is a French multinational company that operates more than 9,000 multiformat retail stores-hypermarkets, supermarkets, discount stores, convenience stores, and restaurants- throughout the world. In January 20X5, Casino issued €600 million of notes at a price of 101, meaning that the company raised €606 million cash by issuing these securities. Details of the note offering are described in C11-3 in Chapter 11.

Required:

1. Casino management treated the notes as equity instruments for financial reporting purposes in accordance with International Financial Reporting Standards (IFRS). What specific IFRS guidance helps accountants and auditors distinguish between liabilities and equities?

2. Do you concur with management's decision to treat the notes as equity instruments? Why?

3. Suppose the notes were issued on January 1, 20X5, that the first year's floating interest rate is 5%, and that interest is to be paid on December 31 of each year. Prepare the journal entries Casino would use to record (a) issuance of the notes on January 1, 20X5; (b) interest expense for the year; and (c) the cash interest payment on December 31, 20X5. Income tax considerations may be ignored.

4. How would the Casino notes be treated under U.S. GAAP?