On 1 June 2020 1 million 5% convertible redeemable preference shares were issued at par (par/nominal value £1 each). The preference shares are redeemable at par for cash on 31 May 2024, or are convertible into 200,000 new £1 ordinary shares at that date. The preference dividend is paid on 31 May each year. An interest rate on similar redeemable preference shares without the conversion option is 7%. In the draft accounts, the preference shares have been accounted for as equity as it is expected that the holders of the preference shares will choose the conversion option rather than to redeem the preference shares. In line with the treatment of the preference shares the dividend paid has been deducted from retained earnings and has been disclosed in the statement of changes in equity. Confirm that this accounting treatment is correct in accordance with IFRS Standards...

Answer rating: 100% (QA)

Accounting treatmement of treating entire amount as an equity is wrong ... View the full answer