English, Article, Journal or magazine article edition: Preferred Stock: Liability or Equity? Jaan Alver

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Bookmark: http://trove.nla.gov.au/version/182921
Physical Description
  • preprint
Language
  • English

Edition details

Title
  • Preferred Stock: Liability or Equity?
Author
  • Jaan Alver
Physical Description
  • preprint
Notes
  • Accounting for financial instruments has been the most controversial area in the development of the IASB’s standards. The FASB and the IASB are currently working together towards a comprehensive standard of accounting for financial instruments with characteristics of equity, liability, or both. The main problem is how to distinguish liabilities from equity. According to the FASB, a new standard is necessary because current accounting literature addressing this issue is inconsistent, subject to structuring and difficult to understand and apply. This paper examines the current situation in classifying preferred stocks. A detailed comparison of common and preferred stocks, and debt securities and preferred stocks is then presented. Three theories of equity (proprietary theory, entity theory and residual equity theory) are described and compared, and the legal and economics approach to determining the difference between liabilities and equity are discussed. Finally, the IASB rules set up in IAS 32 and the Estonian rules set up in Commercial Code and accounting guideline RTJ 3 are discussed.
  • IAS 32, financial instrument, equity instrument, liability, preferred stock, preference share(s)
  • RePEc:ttu:wpaper:165
Language
  • English
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