Company A issues preference shares to Company B,the terms of which entitle Company B to redeem the preference shares for cash if Company A's revenues fall below a specified level.From Company A's perspective the preference shares are:
A)a financial asset.
B)a financial liability.
C)an equity instrument.
D)a compound financial instrument.

Question

Quizplus · Accepted Answer

The preference shares issued by Company A to Company B contain a redemption feature based on a specific condition, which makes them a financial liability for Company A.

Company a Issues Preference Shares to Company B,the Terms of Which