Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › Preference shares
- This topic has 3 replies, 2 voices, and was last updated 8 years ago by
MikeLittle.
- AuthorPosts
- May 24, 2016 at 5:57 pm #316871
When a co. says it issued preference shares, are actual shares issued like in the issue of ordinary shares?
May 24, 2016 at 6:48 pm #316885Yes, but they are not the same class of share as equity / ordinary shares
May 24, 2016 at 8:32 pm #316902Ok, are irredeemable preference shares loans the same as loan notes?
May 25, 2016 at 7:49 am #316955No, irredeemable preference shares are …. shares
The words at the END of each following point in brackets relate to loan notes
– the owner / holders of irredeemable preference shares are share holders in the company (loan note holders are creditors of the company)
– they are entitled to an annual dividend (provided there are enough distributable earnings) (loan note holders get an annual interest payment, whether or not there are distributable profits)
– the rate of dividend is fixed (the rate of interest paid is fixed)
– they tend not to have a vote (as creditors, they get no votes)
– they are paid AFTER the loan note holders but before the equity shareholders in a liquidation (they are paid BEFORE all shareholders)
the balance on the irredeemable preference share account (the nominal value of those irredeemable preference shares in issue) is shown as part of equity (redeemable preference shares are shown as long term liability) (the loan note balance is shown as a long term liability
Hope that helps
- AuthorPosts
- You must be logged in to reply to this topic.