Compound financial instruments require bifurcation into liability and equity components with residual equity measured after liability valuation.

Issuers must bifurcate a non-derivative instrument into liability and equity components when both exist; the liability component is measured at the fair value of a comparable liability without an equity option, and the equity component is the residual between the instrument's fair value and that liability. Transaction costs are allocated proportionally and reduce initial recognised amounts. The liability is subsequently measured at amortised cost, the equity component remains at initial recognised value, and maturity results in conversion into share capital or cash redemption with the equity component moved to retained earnings where applicable.

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