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Debt classified as equity

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA SBR Exams › Debt classified as equity

  • This topic has 1 reply, 2 voices, and was last updated 6 years ago by AvatarStephen Widberg.
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  • February 1, 2020 at 3:15 pm #560370
    Avatarantsam31
    Member
    • Topics: 34
    • Replies: 7
    • ☆

    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
    AvatarStephen Widberg
    Keymaster
    • Topics: 17
    • Replies: 3451
    • ☆☆☆☆☆

    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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