IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Preferred Stock: Liability or Equity?

  • Jaan Alver

    ()

    (Department of Accounting at Tallinn University of Technology)

Registered author(s):

    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.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL: http://deepthought.ttu.ee/majandus/tekstid/TUTWPE_07_165.pdf
    Download Restriction: no

    Paper provided by Tallinn School of Economics and Business Administration, Tallinn University of Technology in its series Working Papers with number 165.

    as
    in new window

    Length: 15
    Date of creation: 2007
    Date of revision:
    Publication status: Published in Working Papers in Economics.School of Economics and Business Administration,Tallinn University of Technology (TUTWPE), Pages 41-55
    Handle: RePEc:ttu:wpaper:165
    Contact details of provider: Postal: Kopli tn. 101, 11712 Tallinn
    Phone: +(372)620 3535
    Fax: +(372)620 3946
    Web page: http://majandus.ttu.eeEmail:


    More information through EDIRC

    No references listed on IDEAS
    You can help add them by filling out this form.

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:ttu:wpaper:165. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Urve Venesaar)

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.