The convertible bonds payable consist of two financial instruments—a debt instrument (bonds payable) and an equity instrument (a conversion option). Because the conversion option can be settled in cash or some combination of cash and stock, generally accepted accounting principles (GAAP) require that the amount received be allocated to debt and equity.
At the end of a recent year, Advanced Micro Devices, Inc. (AMD) reported the $805 million in bonds as follows (amounts in millions):

Long-term debt:
Principal .....................................  $ 805
Unamortized discount .............  (262)
Total                                              $ 543
Equity:
Additional paid-in capital ........ $ 305