How should the bonds be classified

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XYZ Ltd issues five-year interest-bearing bonds. The bonds are convertible to a fixed number of equity instruments of the issuer at the discretion of the holder.

Problem 1: How should the bonds be classified under IAS 32?

Option 1: Instrument having equity and liability components

Option 2: As equity

Option 3: As liability

Option 4: Neither equity nor liability

Reference no: EM132621538

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