Brogan Inc. issues equity shares on January 2, 2018, that must be redeemed (not at the option of the holder) six months after a change in control. On December 31, 2019, there is a change in control, requiring the shares to be redeemed on June 30, 2020. Which of the following best describes how this would be accounted for under IFRS?

Select one:

a. Upon issue, as equity and as debt when change in control occurs.

b. Upon issue, as debt. No need to reclassify when change in control occurs.

c. Upon issue, as equity and subsequently as equity.

d. Upon issue, as debt and as equity when change in control occurs.

Brogan Inc. issues equity shares on January 2, 2018, that must be redeemed (not at the option of the holder) six months after a change in control. On December 31, 2019, there is a change in control, requiring the shares to be redeemed on June 30, 2020. Which of the following best describes how this would be accounted for under US GAAP?

Select one:

a. Upon issue, as equity and as debt when change in control occurs.

b. Upon issue, as debt. No need to reclassify when change in control occurs.

c. Upon issue, as equity and subsequently as equity.

d. Upon issue, as debt and as equity when change in control occurs.

Hydra Technologies issued $1 million of convertible bonds at par value. The bond is a five-year issue with interest payable annually at the end of the year at a nominal interest rate of 3%. The present value of the interest payments (using the 6% prevailing rate for similar debt without conversion option) and return of principal is $126,371 and $747,258, respectively. Each bond has a face value of $1,000 and is convertible at any time up to maturity into 200 shares of common stock. At the date of issue, the fair value of Hydra Technologies common stock is $3. How will the amount recorded to equity differ under IFRS and US GAAP on the date of issue?

Select one:

a. IFRS equity will exceed US GAAP by $873,629

b. IFRS equity will exceed US GAAP by $126,371

c. IFRS equity will equal US GAAP

d. US GAAP equity will exceed IFRS by $50,000

e. US GAAP equity will exceed IFRS by $243,255