I went back to the 07 TIM annual and found the following in...

I went back to the 07 TIM annual and found the following in reference to compound financial instruments

"The component parts of compound financial instruments are classified separately as liabilities and equity in accordance with the substance of the
contractual arrangement.
At the date of issue, the fair value of the liability component is estimated using the prevailing market interest rate for a similar non–convertible debt.
The equity component initially brought to account is determined by deducting the amount of the liability component from the amount of the compound
instrument as a whole."

Could someone with a better knowledge of accountancy translate that in simple english please?

Neil