Convertible Instruments Valuations

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Valuation of convertible instruments involves determining the fair value of financial instruments that have both debt and equity characteristics and can be converted into a predetermined number of shares or other equity instruments. These instruments, such as convertible bonds or convertible preferred stock, typically carry an embedded option allowing the holder to convert the instrument into equity at a specified conversion ratio and within a specified period.

Entities reporting under applicable accounting standards, such as Ind AS or IFRS, need to disclose the fair value of convertible instruments in the financial statements. Clear and comprehensive disclosures should be provided regarding the valuation techniques used, significant inputs employed, and any changes in fair value measurement.