Should preferred stock be recognized as a liability, or should it be considered equity? Under IFRS, preferred stock (called preference shares) often is reported as debt, with the dividends reported in the income statement as interest expense. Under US GAAP that is only done for "Mandatorily redeemable" preferred stock.

Two opposing viewpoints are:

1. Preferred stock should be considered equity.
2. Preferred stock should be reported as a liability.

Which view do you favor? Provide support for your argument. In considering this question, focus on conceptual issues - don't feel constrained by US GAAP.