Sigma Ltd. issued convertible debentures (face ₹100, coupon 6%, redemption premium ₹10) carried at ₹31.5 cr under previous GAAP at transition. Under Ind AS 32, the debt component must be split from equity. With market rate 10% and 4 years remaining: debt component ₹93.82 per debenture × 30,000 = ₹28.15 cr (after unwinding to transition date = ₹30.28 cr); equity component ₹1.85 cr. The transition entries are:

Para D18 — at transition, the entity splits the compound instrument into debt and equity. The debt is at present value (here ₹30.28 cr after two years of unwinding); equity is the residual ₹1.85 cr. The difference vs previous-GAAP carrying amount goes to retained earnings (debit ₹0.63 cr = ₹31.5 − ₹30.28 − ₹1.85). The old liability is derecognised. There is also a simplification: if the liability is no longer outstanding at transition, no split is required.