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Debt classified as equity

This topic has 1 reply, 2 voices, and was last updated 5 years ago by Stephen Widberg.

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February 1, 2020 at 3:15 pm #560370
antsam31
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I am working question 46 b of kaplan and am totally confused. The question asks to explain the impact on the FS if a financial liabilty was misclassified as an equity item.
The answer however treats when a Financial instrument is reported as debt rather than equity.
February 1, 2020 at 6:20 pm #560394
Stephen Widberg
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I do not have the Kaplan question, but I do not need to see it.
I debt is mis-classified as equity, then:
1. Gearing is UNDERSTATED
2. Interest cover is OVERSTATED
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