In case of a company issuing compulsory cumulative convertible preference shares and compulsory convertible Debns,Should the instruments be recognised as Compund Financial Insturments where the insstruments carry very less dividend rate and interest rate for e.g 0.001%?? or it should be shown as equity??
Replies (3)
Quick Summary
This discussion explores the accounting treatment for compulsory convertible preference shares and debentures. It questions whether instruments with very low dividend or interest rates should be classified as compound financial instruments or equity. The consensus is that convertible preference shares are initially recognised as debt, even with minimal dividend rates, and are only classified as equity upon conversion.
Convertible preference shares will be initially recognised as debt and eventually when they are converted into equity, only then they are classified as equity