How is the equity portion of convertible bonds subsequently measured?

The equity portion of convertible bonds is subsequently measured at historical cost. This means that once the equity component is established at the time of issuance, it remains recorded at the initial amount as determined during the bond's issuance.

Historically, the equity component represents the value attributed to the conversion feature of the bond, which allows bondholders to convert their bonds into a predetermined number of shares of the issuing company's stock. This value is typically determined at the time of issuance based on the residual value after identifying the liability component of the bond.

Other methods of measurement, such as market value or par value, do not apply in this context because the equity portion isn't remeasured based on fluctuations in the market or at the bond's face value. Organizational cost is also not relevant here, as it pertains to the costs incurred when forming a company rather than the measurement of equity attributable to convertible bonds.