should irredeemable dividends be recognised as a finance cost
The preference shares contain an obligation to pay cash to the preference shareholders and they should be classified as a financial liability, disclosed as current/non-current dependant on the contractual terms. The 10% dividends should be recognised as a finance cost in the profit and loss account.Compound financial instruments. A compound financial instrument is a financial instrument which contains a mixture of both debt and equity.lternatively, it may be converted into equity shares on the basis of 100 new shares for each C200 worth of loan note. An equivalent loan note without the conversion option would carry interest at 10%. Interest of C48,000 (C600,000 x 8%) has already been paid and included as a finance cost in profit and loss.