What is Preferred Shares?
Preferred Shares refers to a category of assets, equity, or related balance sheet item that companies must recognize, measure, and disclose under IFRS. Proper accounting treatment ensures the financial statements give a fair view of the company’s resources and obligations.
How It Works
- Recognize Preferred Shares on the balance sheet when control and measurement criteria are met.
- Measure initially at cost and subsequently per IFRS rules (fair value, amortized cost, etc.).
- Disclose movements (additions, disposals, revaluation) in the notes.
- Test for impairment at each reporting date when indicators exist.
- Reconcile subledger to general ledger monthly.
Saudi Context
Under Saudi accounting practice, Preferred Shares is reported in line with IFRS as adopted by SOCPA. ZATCA-registered companies must keep supporting documentation and reflect Preferred Shares consistently in their VAT returns, zakat declarations, and Annual Financial Statements. Saudi Vision 2030 compliance and CMA disclosure rules add further reporting layers for listed firms.
Example
A Riyadh-based trading company applies Preferred Shares in its month-end close. The accounting team computes the figure using actual transactional data from Qoyod, compares it against the prior period and budget, and includes a narrative in the monthly management report so leadership can act on the result.