Dicussion pg 807

Dicussion pg 807 - Current practice is to list redeemable...

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How should mandatorily redeemable preferred shares be reported in the balance sheet? Redeemable preferred stock is defined as any stock which: (1) The issuer undertakes to redeem at a fixed or determinable price on a fixed or determinable date (2) Is redeemable at the option of the holder (3) Has conditions for redemption, which are not solely within the control of the issuer. The Securities and Exchange Commission (SEC) currently requires that the amount for redeemable preferred stock be listed as a separate item on a company's balance sheet; however, this amount should not be included in total shown for stockholder's equity.
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Unformatted text preview: Current practice is to list redeemable preferred stock as an item between the liability and equity sections of a balance sheet. The SEC felt, in making this requirement, that redeemable preferred stock has characteristics significantly different from conventional equity securities, and that the related cash flow obligations should be distinguished from permanent capital. The SEC did not, however, go so far as to say that mandatorily redeemable preferred stock should be considered (and classified) as a liability....
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This note was uploaded on 07/10/2011 for the course BUSINESS 450 taught by Professor Bayer during the Spring '11 term at Limestone.

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