(iii) On 31 March 2020 GHL issued $15 million 5% convertible bonds at par. Interests on the bonds are payable annually in arrears with first payment on 31 March 2021. Issue costs payable to professional advisers were $600,000. The bond can, at the choice of the holders, be redeemed at par on 31 March 2023; or converted on 31 March 2023 into ordinary shares in GHL at the rate of three ordinary shares for every $10 bond held.

In the draft financial statements, the proceeds from the bond issue have been recognized as bonds payable. The issue costs have been classified as an administrative expense. Cash received and paid has been recognized. No other entries have been made. The prevailing market interest rate for similar bonds for equivalent risk, but without conversion rights, is 8% per annum.

3) why split accounting should be used for the recognition of the debts with conversion characteristic in accordance with HKAS 32 'Financial Instruments: Presentation'?