According to current GAAP,convertible bonds must be recorded at the value of debt only,with no value assigned to the conversion feature.

According to current GAAP (Generally Accepted Accounting Principles), convertible bonds must be recorded at the value of debt only, with no value assigned to the conversion feature. This is because the accounting treatment of the conversion feature depends on whether it is considered to be a derivative or an embedded conversion feature. If it is a derivative, it must be measured at fair value and recorded in the balance sheet as either an asset or liability. If it is an embedded conversion feature, its value is included in the carrying amount of the host instrument (i.e. the convertible bond). However, the accounting treatment of the conversion feature does not affect the carrying amount of the debt component of the convertible bond, which is recorded at its fair value.