Question: Milner Ltd issues a 6% cumulative preference share for 1 million that is repayable in cash at par 10 years after issue. The only condition

Milner Ltd issues a 6% cumulative preference share for €1 million that is repayable in cash at par 10 years after issue. The only condition on the dividends is that if the directors declare an ordinary dividend the preference dividend (and any arrears of preference dividend) must be paid first. Arrears of dividend do not need to be paid on redemption of the instrument.

Required:

Explain how this preference share should be accounted for over its life.

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