SHARE CATEGORIES – Equity or Liability?

When buying equity shares in a company, one can purchase different category shares, namely ‘ordinary shares’ (also referred to as ‘common stock’) and ‘preference shares’ (also referred to as ‘preferred stock’). Shares represent equity in a company. However, in certain circumstances shares may have to be recognised as a liability in stead of equity. This tip will look at when shares are equity and when it represents a liability.View PDF

LIABILITY – YES or NO? Should it be accrued or provided for?

This tip deals with the principle that a contractual or a statutory obligation in itself does not necessarily gives rise to a liability. For example, an entity is obligated by law to pay income tax – however – in terms of accrual accounting principles, there is no obligation to pay tax unless income has been earned. The earning of the income is the past event that gives rise to the obligation to pay the tax. In this example, the liability is classified as a tax liability in accordance with IAS 12.View PDF