Norman Co., a fast-growing golf equipment company, uses IFRS. To raise capital, it is considering the issuance of convertible bonds. It is also contemplating the establishment of share-based compensation plans to pay and motivate its key employees. Regarding the accounting for dilutive securities and share-based compensation plans, answer the following questions:

1. Why corporations like Norman Co. issue convertible bonds? Briefly explain.

2. Explain how convertible bonds should be reported in the company’s statement of financial position.

3. Under IFRS, what date should be used in determining the value of the share options in a share-option compensation plan? If the market price of the underlying shares changes and result in changes in the fair value of the options? Shall we adjust compensation expense? Why?

4. Over what period should compensation expense related to a share-option scheme be allocated?

5. To provide long-run incentives for its top management, Normal Co. is considering adoption of share-option plans or restricted-share plans. What are the advantages of using restricted shares compared with share options?