Dividends in arrears are dividends on cumulative preferred stock that have not been declared by a company's board of directors. They accumulate over time until they are declared. Unlike declared dividends, they are not considered a legal liability and thus are not reported as such on the balance sheet.

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Dividends in Arrears

Question 39

Multiple Choice

Dividends in arrears

A) are preferred dividends that have been declared but not paid.
B) must be legally paid in the future.
C) are dividends that have not been declared on cumulative preferred stock.
D) are reported as a liability on the balance sheet until paid.

Correct Answer: