The classification of a preference share as an equity instrument or financial liability is:
A) affected by a history of making distributions.
B) affected by an intention to make distributions in the future.
C) not affected by a history of making distributions.
D) not affected by the other rights that attach to them if they are non-redeemable.

Question

Quizplus · Accepted Answer

The classification of a preference share as an equity instrument or financial liability is not affected by a history of making distributions or by the other rights that attach to them if they are non-redeemable. The classification is based on the substance of the instrument and the contractual arrangements, regardless of any intentions to make distributions in the future.

The Classification of a Preference Share as an Equity Instrument