Equity Problem #2

Part A.

The Bockster Company issues $20 million of preferred stock (preference shares using IFRS terminology) on January 1, 2010 at par value. The preferred stock has a 5% fixed annual cash dividend and can be redeemed at the option of the holder for a fixed amount of cash at any time.

Required: Discuss how Bockster should account for this preferred stock under IFRS.

Part B.

Now assume the preferred stock is not redeemable, but instead is convertible into a fixed number of shares of common stock at the option of the holder at any time.

Required: Discuss how Bockster should account for this preferred stock under IFRS.