CFM16200 - Accounting for financial instruments: IAS 32 and IAS 39: treatment of interest, dividends, losses and gains

Interest, dividends, losses and gains

Interest, dividends, gains, and losses relating to an instrument classified as a liability should be reported in the income statement. This means that dividend payments on preferred shares classified as liabilities are treated as expenses. On the other hand, distributions (such as dividends) to holders of a financial instrument classified as equity should be charged directly against equity, not against earnings.