Analysis Of The Impact Of Accounting Treatment Of Preferred Stocks On Xiaomi’s Performance

In recent years,the use of convertible redeemable preferred shares for financing is especially popular in TMT（telecommunications,media,technology）industry.The number of domestic companies using convertible and redeemable preferred shares to raise funds is also gradually increasing.However,there is relatively little research literature on the nature,accounting treatment and disclosure of convertible redeemable preferred stock,an innovative financial instrument,by Chinese scholars.The research in this article can complement the shortcomings in the research field,and at the same time,it can also provide a reference for users of the statements to correctly understand the impact of the recognition and measurement of convertible redeemable preferred shares on corporate performance.Taking Beijing Xiaomi Technology Co.,Ltd.as an opportunity to issue its prospectus on the Stock Exchange of Hong Kong,this paper takes the phenomenon of excessively high asset-liability ratio and negative net profit caused by accounting recognition and subsequent measurement of convertible redeemable preferred shares in its statements as an example to introduce the impact of IFRS on the operation reality of listed companies.Combining the relevant provisions on financial liabilities and equity instruments in IFRS 9 Financial Instruments（newly revised in 2014）,through sorting out and analyzing the relevant provisions on convertible and redeemable preferred shares issued by Xiaomi Company,it is confirmed that under the standards of International Financial Reporting Standard,Xiaomi Company recognizes convertible and redeemable preferred shares issued by Xiaomi Company as financial liabilities in accordance with the provisions of International Financial Reporting Standard.Under the theoretical guidance of accounting,corporate governance,financial management and other disciplines,and through the research method combining qualitative and quantitative methods,it is concluded that Xiaomi Company’s recognition of convertible redeemable preferred shares as financial liabilities under the standards of International Financial Reporting Standards,subsequent measurement of fair value and inclusion of changes in fair value changes in profits and losses make the results of the company’s financial accounting inconsistent with the actual operating conditions of the enterprise,resulting in a great cognitive challenge to report users.The accounting treatment of convertible and redeemable preference shares in accordance with the IFRS regulations enables large losses to be recognized when the company’s operating conditions are better,and more profits can be recognized when the operating conditions are deteriorating.At the end of the article,from three aspects of information disclosure,measurement and classification of gains and losses from changes in fair value,specifically the introduction of Non-GAAP performance indicators,the inclusion of changes in fair value of financial liabilities in other comprehensive income,relaxation of the criteria for recognition of convertible redeemable preferred shares as equity instruments,etc.,the article puts forward suggestions to improve the accounting statements that cannot truly reflect the actual operating performance of enterprises due to the provisions of international financial reporting standards on convertible redeemable preferred shares.