Comments

  1. Avatar of tejot says

    Sir,

    I am just inquisitive to know that which element does irredeemable preference shares are part of? And do they really exist (for ex. Irredeemable debentures do not exist in real life)?

    • Avatar of MikeLittle says

      You say “irredeemable debentures don’t exist in real life” What about the “Undated Government Bonds” like 2% Treasury Stock and 3% War Loan. (The percentages may be incorrect, but the principle remains valid)

      I’ve never personally come across any Irredeemable Preference Shares in any of my dealings / dabblings / losings in the shares market but I see no reason why they shouldn’t exist.

      Now, where to classify them? That’s a good question and one I keep asking myself together with the promise to myself that I shall someday write to the P2 and F7 examiners and ask them the same question. Where preference shares are redeemable on a fixed or determinable future date, clearly they are classified as debt with “dividends” being included as a Finance Charge.

      But Irredeemable Preference Shares – well, that’s a problem. They don’t satisfy the definition of equity nor are they redeemable on some fixed or determinable future date.

      In brief ……I don’t know

      Sorry

Leave a Reply