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What to include in gearing calculation

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FM Exams › What to include in gearing calculation

  • This topic has 3 replies, 2 voices, and was last updated 5 years ago by John Moffat.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • June 21, 2019 at 6:13 pm #521021
    anazoric
    Participant
    • Topics: 36
    • Replies: 59
    • ☆☆

    I have seen some SOFP where preference shares are included in the equity and some others where they are included in long term debt. And in both cases, they did not specify what to include in the gearing ratio calculation. What should we do in this case?

    June 22, 2019 at 9:50 am #521051
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54679
    • ☆☆☆☆☆

    Irredeemable preference shares are treated as equity. Redeemable preference shares are treated as debt.

    If the question does not make it clear whether they are redeemable or irredeemable, then assume them to be irredeemable.

    June 22, 2019 at 6:05 pm #521080
    anazoric
    Participant
    • Topics: 36
    • Replies: 59
    • ☆☆

    Thank you John.

    June 23, 2019 at 9:19 am #521103
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54679
    • ☆☆☆☆☆

    You are welcome 🙂

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    Posts
Viewing 4 posts - 1 through 4 (of 4 total)
  • The topic ‘What to include in gearing calculation’ is closed to new replies.

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