Master Creator Pvt. Ltd. issued an 8% CONVERTIBLE LOAN of ₹64 lakh on 1 April 20X1, redeemable at par on 31 March 20X5 OR convertible at 100 new shares per ₹200 of loan. Equivalent non-convertible loan rate = 10%. PV of bond cash flows at 10% (4 years interest + redemption) ≈ ₹59.84 lakh. Under Ind AS 32, the entity should:

Ind AS 32 — convertible loan is a COMPOUND instrument. Debt component = PV of stated cash flows at market rate for similar non-convertible debt (here 10%). Equity component = residual (proceeds − debt PV). Interest expense follows EIR on the AMORTISED COST of the debt component. The financial-cost charged in P&L would be higher than the stated 8% × ₹64L; the difference between paid interest and EIR interest unwinds the debt.