The fact that a preference share is redeemable:
A) Makes it a financial liability.
B) Makes it an equity instrument.
C) Makes it a compound financial instrument.
D) Does not automatically mean that it is a financial liability. The length of time until redemption is critical, because if it is greater than two years, it must be classified as an equity instrument.
E) Does not automatically mean that it is a financial liability. Conditions and rights attaching to the share need to be considered before it can be classified as either a financial liability or equity instrument.

Question

Quizplus · Accepted Answer

The fact that a preference share is redeemable does not automatically classify it as a financial liability or equity instrument. The conditions and rights attached to the share need to be considered before it can be classified.

The Fact That a Preference Share Is Redeemable