Which of the following is/are not true regarding the classification of redeemable preferred shares on the balance sheet?
A)The classification of redeemable preferred shares on the balance sheet depends on the conditions for redemption.
B)If only the issuing firm has the option to redeem, then the preferred shares are part of its shareholders' equity.
C)If the issuing firm must redeem the preferred shares (so-called "mandatory redemption"), either at a specified time or upon a specified condition certain to occur, the issuing firm treats the preferred shares as its shareholders' equity.
D)If the preferred shareholders have the option to require redemption, then the preferred shares appear between liabilities and shareholders' equity under U.S.GAAP.
E)If the preferred shareholders have the option to require redemption, then the preferred shares appear as a liability under IFRS.

Question

Quizplus · Accepted Answer

EC) This statement is not true because if there is a mandatory redemption feature, the preferred shares are treated as a liability, not equity, because the company is obligated to pay out cash in the future.E) This statement is not true because under IFRS, if preferred shareholders have the option to require redemption, the preferred shares may not necessarily appear as a liability. The classification depends on the specific terms and conditions of the redemption option.

Which of the Following Is/are Not True Regarding the Classification