The shareholders’ meeting for Kissinger SE has been in progress for some time. The chief financial officer for Kissinger is presently reviewing the company’s financial statements and is explaining the items that comprise the equity section of the statement of financial position for the current year. The equity section of Kissinger at December 31, 2020, is as follows.

At the meeting, shareholders have raised a number of questions regarding the equity section.

Instructions
With the class divided into groups, answer the following questions as if you were the chief financial officer for Kissinger SE.
a. “What does the cumulative provision related to the preference shares mean?”
b. “I thought the ordinary shares were presently selling at €29.75, but the company has the shares stated at €1 per share. How can that be?”
c. “Why is the company buying back its ordinary shares? Furthermore, the treasury shares have a debit balance because they are subtracted from equity. Why are treasury shares not reported as an asset if they have a debit balance?”

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Kissinger SE Statement of Financial Position (partial) December 31, 2020 Share capital-preference, authorized 1,000,000 shares cumulative, €100 par value, €8 per share, 6,000 shares issued and outstanding Share capital-ordinary, authorized 5,000,000 shares, €1 par value, 3,000,000 shares issued, and 2,700,000 outstanding Share premium–preference Share premiumordinary Retained earnings Less: Treasury shares (300,000 shares) € 600,000 3,000,000 50,000 25,000,000 900,000 9,300,000 Total equity €20,250,000