Question

Which of the following statements is true with regard to preferred stock (preference shares)? Multiple Choice Most preferred stock (preference shares) is reported under IFRS as equity. Under IFRS, preferred stock dividends are reported in the income statement as interest expense. Most preferred stock (preference shares) is reported under U.S. GAAP as debt. Under U.S. GAAP, mandatorily redeemable preferred stock is reported as equity.

Answer 1

Answer: Under IFRS, preferred stock dividends are reported in the income statement as interest expense

Explanation:

Preference shares, also called preferred stock, are the shares of the stock of a company whereby dividends are paid to the shareholders before the dividends are being issued.

For this type of shares, even if the company goes bankrupt, the preferred stockholders will be paid from the assets of the company before the common stockholders.

Under IFRS, preferred stock dividends are reported in the income statement as interest expense