Question

Convertible debentures cannot be issued at a discount if ______.

Options

• They are to be immediately converted 

• They are not to be immediately converted

• Both the above alternative

• None of the above

Answer 1

Convertible debentures cannot be issued at a discount if they are to be immediately converted.

Explanation:

A debenture is said to be issued at a discount when its price is less than its nominal value. A discount on debenture issuance is a capital loss that is recorded on the asset side of the balance sheet under the heading "Miscellaneous Expenditure" until written off. The discount on debenture issuance can be written off either by debiting it from the profit and loss account or by deducting it from any capital profits made during the life of the debentures. The Companies Act of 2013 places no restrictions on the issuance of discounted debentures. Convertible debentures, on the other hand, cannot be issued at a discount if they are to be converted immediately.