Australia Accounting for Step-up Bond

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How would you account for this bond under IFRS:
Face Value: $1m
Issue Price: $1m
Coupon Payment:
Year 1: 4%
Year 2: 6%
Year 3: 8%
Year 3: Maturity

Is it either:
a)
Year 0 Dr Cash $1m Cr Bond liability $1
Year 1 Dr Interest exp $40,000 Cr Cash $40,000
Year 2 Dr Interest exp $60,000 Cr Cash $60,000
Year 3 Dr Interest exp $80,000 Cr Cash $80,000
Year 3 Dr Bond liability $1m Cr Cash $1m
or;
b)
Year 0 Dr Cash $1m Cr Bond liability $1
Year 1 Dr Interest exp $59,233 Cr Cash $40,000 Cr Bond liability $19,233
Year 2 Dr Interest exp $60,372 Cr Cash $60,000 Cr Bond liability $372
Year 3 Dr Interest exp $60,394 Cr Cash $80,000 Dr Bond liability $19,606
Year 3 Dr Bond liability $1m Cr Cash $1m

Calculated using the effective interest rate of 5.9233% of outstanding balance (discounts all cash flows back to $1,000,000 PV)

Typically, bonds issued at par have the same coupon rate for all three years (e.g. 6%), so you simply debit the interest expense and credit cash at bank. Whereas bonds issued at a premium/discount will require debit/credit adjustments to the bond liability account.

Seeing as the bond mentioned above (despite being issued at par) has a coupon rate below market rate for year 1 and above market rate for year 3, would you need to do the same debit/credit to the bond liability account (similar to if it was issued at premium/discount).

I would really value everyone's opinion and if you could point me to a specific section that would be absolutely terrific.

Thank-you
 

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