A preference share is a financial liability:
A. If it provides for mandatory redemption by the issuer for a fixed or determinable amount at a fixed or determinable future date.
B. If it gives the holder the right to require the issuer to redeem the instrument at or after a particular date for a fixed or determinable amount.
C. If it gives the issuer the sole discretion to redeem the instrument at a date of their choice for a fixed or determinable amount.
D. it provides for mandatory redemption by the issuer for a fixed or determinable amount at a fixed or determinable future date and if it gives the holder the right to require the issuer to redeem the instrument at or after a particular date for a fixed or determinable amount.
E. If it provides for mandatory redemption by the issuer for a fixed or determinable amount at a fixed or determinable future date and If it gives the issuer the sole discretion to redeem the instrument at a date of their choice for a fixed or determinable amount.

Question

Quizplus · Accepted Answer

A preference share is considered a financial liability if it includes an obligation for the issuer to deliver cash or another financial asset to the holder, such as mandatory redemption or the holder's right to require redemption. Options A, B, and D describe scenarios where the issuer has an obligation, making them financial liabilities. Option C does not create a liability as the issuer has discretion. Option E is incorrect because the issuer's discretion negates the liability aspect.

A Preference Share Is a Financial Liability