CERTYNEX IFRS ACADEMY

Pavot SA has two classes of shares: ordinary shares, which are equity instruments, and preference shares redeemable in cash on a fixed date, classified as a financial liability (case facts). The general meeting decides a dividend of 40,000 on the ordinary shares and of 25,000 on the preference shares. How does Pavot account for these two dividends?

The ordinary dividend of 40,000 is recognised directly in equity; the preference dividend of 25,000 is recognised in profit or loss, as a cost linked to the financial liability.

Both dividends, 65,000 in total, are recognised directly in equity, since both are decided by Pavot's general meeting.

Both dividends, 65,000 in total, are recognised in profit or loss, since part of Pavot's capital is classified as a financial liability.

The ordinary dividend is recognised in profit or loss and the preference dividend directly in equity, the distinction following the ranking of the holders, without the classification of the shares playing a part.