Study On Treatment Of Accounting And Tax Problems On China’s Preferred Stocks And Perpetual Bonds

With the rapid economic development,traditional financing methods such as the issuance of common stocks and bank loans have been unable to meet the needs of enterprises to expand funds.The introduction of new financial liabilities and equity instruments is the only way for the current economic development.A series of financial instruments like "stocks" and "Debt" appear in the market.In many financial instruments,preferred stocks and perpetual bonds are the representatives,which are usually used by enterprises.The determination of the accounting attributes of the two instruments directly affects the tax treatment of enterprises,while the accounting and tax treatment methods of different companies the operating conditions of the enterprises.This has made people focus on the distinction between the accounting attributes of financial instruments and the adoption of appropriate accounting and tax methods.Therefore,this paper conducts in-depth research on the accounting and tax treatment of preferred shares and perpetual debts,intending to improve the company’s future treatment of accounting and tax.This thesis has adopted the method of case analysis,mainly based on Summing—up and comparison.First,in the current capital market,the importance of accounting and tax treatment of preferred stocks and perpetual bonds was discussed.Second,This paper introduced the basic meaning of financial liabilities and equity instruments,summarized them through the issuing of preferred stocks and perpetual bonds,and confirmed the division of accounting attributes of preferred stocks and perpetual bonds.Then,based on the differences in attributes,this paper summarized summarize China’s current accounting and tax of preferential stocks and perpetual debts,as well as some existing problems.Additionally,through data,the status of the development of preferred stocks and perpetual debts in China and the possible future trends in various industries will be demonstrated.Finally,This paper used is Yunnan Yunye’s issuance of preferred stocks and Wuhan Metro’s issuance of perpetual debt as the case,and the core content of this paper is to combine and analyse the accounting attributes of both ways,relying on the State Administration of Taxation Announcement No.41,No.46 of 2013.Through research and analyses,it has been found that the accounting treatment of preferred stocks and perpetual debts has already had relevant regulations,but taxation treatment is still a problem that has not been completely solved.Enterprises generally classify financial instruments directly as equity and debt investments to deal with according to their own circumstances.The innovation of this paper is to assume the situation of Yunnan Yunye’s issuance of perpetual debt and Wuhan Metro’s issuance of preferred stock.Through a comparison of these two cases,if a company issues preferred stocks and perpetual debts,As an equity instrument,the preferred stock can reduce the liability/asset ratio and improve the capital structure of enterprises better.Compared with perpetual debt as a financial liability.Perpetual debt handled as an equity instrument and the preferred stock as a financial liability are basically have the same performance for the company’s solvency,but the effect of the former one is slightly better.The tax treatment of these two ways are basically the same.