On October 1 of the current year, Letterman Ltd. issued a 20-year, $5,000,000 convertible bond at par value, convertible to 20,000 common shares. Interest is payable semi-annually at 5%. Letterman reports using IFRS. Which of the following describes how Letterman should account for the bond at initial recognition? 

A. Letterman determines the future value of the liability to be reported on the statement of financial position. The excess of price over the liability is reported as equity on the statement of financial position. 

B. Letterman should determine the present value of the bond to determine the liability to be reported on the statement of financial position. The excess of price over the liability is reported as equity on the statement of financial position. 

C. Letterman must report the bond as a liability. 

D. Letterman can choose to report the bond as a hybrid instrument (showing debt and equity components on the statement of financial position) or to record the bond as a pure liability.