valaution as per IFRS

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Rohit Jain

Rohit Jain (Querist)
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23 September 2008 How to value Preference shares as per IFRS

CMA Gul S

CMA Gul S (Expert)
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23 September 2008 The consequences of international accounting standards are likely to reach beyond the impact on financial statements. This paper demonstrates one of the economic implications of international standards. We focus on the impact of the IFRS regulation on preference shares (IAS 32) in the Netherlands. IAS 32 causes most preference shares to lose their classification as equity and these shares will hence be classified as liabilities. We document that for Dutch firms with preferred stock outstanding, the reclassification will on average increase the reported debt ratio by 35%. We find that 71% of the firms that are affected by IAS 32 buy back their preference shares or alter the specifications of the preference shares in such a way that the classification as equity can be maintained. The main determinant of the decision whether to give these consequences to IAS 32 is the magnitude of the impact of IAS 32 on a firms debt ratio. We conclude that IFRS does not only lead to a decrease in the use of financial instruments that otherwise would have added to the capital structure diversity, but also changes firms real capital structure.

Keywords: Economic Consequences, Accounting Changes, IFRS, IAS 32, Preference Shares, Magnitude Effect

Taranjit Singh

Taranjit Singh (Expert)
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06 October 2009 Hello, is this an old query still pending? You can send me a Pm if yes....I m trying to take all old pending queries in Accounting Forum......Thanx.

Taranjit Singh

Taranjit Singh (Expert)
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06 October 2009 Hello, is this an old query still pending? You can send me a Pm if yes....I m trying to take all old pending queries in Accounting Forum......Thanx.

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