What is the measurement of a convertible bond's debt portion after its initial recognition?

The measurement of a convertible bond's debt portion after its initial recognition is at amortized cost. This approach is in accordance with the applicable accounting standards that require financial liabilities, including the debt component of a convertible bond, to be measured at amortized cost using the effective interest method.

When a convertible bond is issued, its initial recognition typically records the liability at its fair value. However, after this initial recognition, the carrying amount of the debt portion is adjusted over time for interest expense and any repayments. The effective interest method allocates interest expense over the bond's life, which results in the carrying amount of the bond being updated based on interest payments and the effective interest rate applied to the carrying amount.

In contrast to other options, nominal value does not reflect actual economic value or adjust for interest; cost generally refers to the historical amount without ongoing adjustments; and fair value reflects potential market fluctuations, which are not applicable for subsequent measurement of this liability under the amortized cost method. Hence, the correct measurement is at amortized cost.