Optimal Study On Accounting Treatment Of Preferred Stock Financing

Non-public companies often can not fully meet the capital demand through bank loans and other means,preferred stock financing has become a large number of non-public company financing the main way.Preferred stock with dividend terms,repurchase terms,conversion terms and other complex terms,to reconcile the interests of both investors and financiers,but also to the accounting treatment of complexity.At present,companies habitually record preferred stock as a financial liability measured at fair value and whose movements are recorded in the profits and losses of the current period in accordance with accounting standards,this kind of treatment will bring about the problem of high false loss on the income statement of the listed company,which results in the counter-intuitive phenomenon that the better the company develops,the bigger the loss.So how to deal with the preferred stock correctly is very important for the enterprise to reflect its own information and even perfect the financing way of the preferred stock.At present,most of the research on accounting treatment of preferred stock is based on concrete cases,the universality of the research object and the detailed degree of the theory are not enough.This thesis studies the optimization of accounting treatment of preferred stock,and puts forward a general optimization scheme of accounting treatment.Firstly,this thesis explores the problem and analyzes the types and attributes of the financing terms that the interests demand and the interests demand show in the financing process Then it analyzes the financing types of the current mainstream preferred stock in China and the accounting treatment methods commonly used by enterprises at present,and finds that the current treatment methods of convertible redeemable preferred stock have defects in many aspects,the necessity of optimizing the accounting treatment scheme of preferred stock is clarified.On the basis of analysis,this thesis begins to explore the preferred stock accounting treatment optimization program.The first step is to set up the simulated financing terms including the different terms of preferred stock as the research object of the general accounting treatment,this thesis studies the effect and defect of the change of fair value in accounting for other comprehensive income,and finds that the treatment of financial liabilities can not accurately reflect the financial situation,the reason is that the recognition of fair value measures matches convertible redeemable preferred stock rather than recognized financial liabilities.Third,the mismatch between preferred stock and financial liabilities is analyzed,this thesis analyzes the actual benefit outflow of the preferred stock under different circumstances,and puts forward the treatment scheme of the split of the compound financial instrument which confirms the actual liability component of the preferred stock by the agreed redemption consideration,in view of the redemption consideration of preferred stock involving fair value,this thesis explores the best estimate of the liability based on the possibility of exercising the right,and confirms the additional amount as the equity instrument,this method can well reflect the actual financial risk of the enterprise,show the investor’s behavior logic,and reflect the enterprise information more accurately.Finally,this thesis verifies the above methods through the case of Xiaomi Company,and concludes that the split method of complex financial instruments is the optimal solution.In addition,this thesis makes a summary of this thesis,and puts forward suggestions on the development direction of the optimization of accounting treatment of preferred shares in China at present,and makes an outlook for the future.