Reference no: EM132434078

On 1 January 2012 PS issued at par, 500,000 R1 5% cumulative preferred shares, redeemable at par in four years. The issue costs were R20,000.PS has not issued preferred shares before and the managing director has asked you to explain how the preferred shares should be treated in the financial statements of PS.

Required:

Explain with reasons, how PS should:

(i) Classify the preferred shares in its financial statements for the year ended 31 December 2012, in accordance with IAS 32 Financial Instruments: Presentation;

(ii) Account for the related costs in accordance with IAS 39 Financial Instruments:

Recognition and Measurement.