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Hi Sorry if this is a silly question. Not sure if it is a F7 question.
But there is a question I need help with.
PT issues million 4% cumulative redeemable $1 preference shares on 1st Jan x1. Which of the following is incorrect?
a) The dividend of $40,000 paid each year would be recognized in the SOCIE.
Why is option A wrong? I thought dividend paid would be shown in the SOCIE. The answer says.. the dividend would be expensed through the p&l as a finance cost rather than being shown as a dividend paid in the statement of changes in equity. Why is that? is there something special about redeemable preference shares?
hi just sharing my thoughts
IAS 39 is no longer used it is replaced by IFRS 9 , do check the IFRS updates
Hi,
Redeemable preference shares are treated a debt in the financial statement based on their substance. As the debt is redeemable there is an obligation to pay cash and so it meets the definition of a financial liability. If we treat the instrument as debt on the SFP then the servicing of the finance will be recognised through profit or loss.
Thanks
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