Study On The Distinction Between Financial Liabilities And Equity Instruments And Economic Consequences

After the party's 19 th National Congress,China's capital market construction continues to advance,and various new types of financial instruments have also appeared in people's field of vision.But the dividing line between financial instruments with both debt and equity is becoming more and more vague,For example,the convertible redeemable preference shares issued by Xiaomi Group have attracted much attention.and its legal form is increasingly divorced from its economic essence.The difficulty of differentiation is increased,and the different nature of financial instruments will be divided.Different economic consequences will not only affect the company's net profit and financial indicators related to net profit,but also affect the company's capital composition and corporate value assessment results.Because the different nature of financial liabilities and equity instruments have different effects on capital composition,and different capital structures will cause enterprises to bear different interest burdens and financial risks,therefore,correctly distinguish financial liabilities and equity instruments,not only with capital structure.Determining the relevant will also affect the issuer's decision on the optimal capital structure and optimal financing mix.Differentiating between financial liabilities and equity instruments will also have different financial statements,such as operating losses or high and low asset-liability ratios.Therefore,the correct classification of financial liabilities and equity instruments is also applicable to report users.Play a very important role.This paper studies the differentiation of financial liabilities and equity instruments,and discusses the accounting treatment of Xiaomi Group's convertible redeemable preference shares and its economic consequences under different nature.This paper first introduces the basic concepts and theoretical basis of financial liabilities and equity instruments,and then separately distinguishes between financial liabilities and equity instruments in IFRS(International Accounting Standards),GAAP(US Financial Accounting Standards)and Chinese Accounting Standards.Analysis,comparing the similarities and differences between the three criteria in distinguishing financial liabilities and equity instruments,introducing the definition,characteristics,advantages and nature of convertible redeemable preferred stocks,and then proceeding to convertible redeemable preference shares issued by Xiaomi GroupAnalysis and analysis of the process by which Xiaomi Group divides convertible redeemable preference shares into financial liabilities according to IFRS,and assuming that Xiaomi Group follows GAAP and divides convertible redeemable preference shares into equity instruments.A comparative analysis of the economic consequences of different divisions.It is hoped that through the analysis of this paper,the investment and financing parties will further understand the convertible redeemable preference stocks,and provide reference and reference for the differentiation of financial liabilities and equity instruments.