Question

You are delivering a presentation, and the subject matter concerns whether a company should report convertible debt simply as a liability, or whether embedded features (like the conversion option) in the debt should be separately accounting for as derivatives.  Thinking beyond the case facts, list four other considerations you should be prepared to address (such as during Q&A) or background understanding you should gain before presenting.   

Answer 1

The subject matter concerns whether a company should report convertible debt simply as a liability, or whether embedded features (like the conversion option) in the debt should be separately accounting for as derivatives.

Explanation :-

The company should not report convertible debts simply as a liability.
Convertible debts should be separately disclosed in the financial statements as a dept is what considered as a major part of the company's capital and how much developed the company is having and in what form, plays an important role in the company is memorandum to the outsiders. Outsiders here are investors and other stakeholders who invests in the company.

Proper disclosure of all the facts and other debt/capital which are in convertible form will put a positive impact on the investors.
So the debts should not be simply be shown as a liability rather should be done separately accounting for as derivatives.

The four other considerations that should be prepared to address (such as during Q&A) or background understanding should be gained before presentation are :-

1. The source of capital should be properly understood.
2. The company's total liability and its actual time period of payment should be considered understood.
3. How much investment the company has paid and its measures awesome income should be understood.
4. What is the current position of the company and how it can be improved these facts should also be known.