| In recent years,with the increase of private equity,convertible redeemable preferred stock,an innovative financial tool,has become a “new favorite”for enterprises to raise funds.However,due to the flexibility of its issuance terms,it involves an international problem in accounting treatment-the distinction between financial liabilities and equity instruments.In recent years,due to the improper accounting treatment of convertible redeemable preferred shares,there are more and more cases that the financial statements“deviate”from the real value of the enterprise,which frequently leads to investors’ misreading of the real value of the issuing enterprise.The above situation also exposed the problem that many scholars are particularly concerned about-the application of international accounting standards to the accounting treatment of financial instruments may cause the abnormality of relevant data.Therefore,the study of Kuaishou technology preferred stock and the relevant accounting provisions of international accounting standards on the accounting treatment of preferred stock will have important theoretical and practical significance for the development of China’s stock market which has not yet been prosperous.In February 5,2021,when the Kuaishou technology was listed on the Hong Kong Stock Exchange,Kuaishou technology recognized the convertible redeemable preferred stock as a financial liability under the International Financial Reporting Standards,and the subsequent measurement of fair value changes was included in the current profits and losses.Therefore,with the rapid increase of Kuaishou technology’s strength,the increasing valuation has led to its huge financial loss.In 2020,the Kuaishou technology’s profit statement showed a loss of 116 billion 635 million yuan,of which 106.846 billion yuan was caused by the inclusion of convertible redeemable preferred shares in financial liabilities.After excluding the above effects,the profit of Kuaishou Technology will increase by about 100 billion yuan in 2020.,and the losses were reduced by about 90%.Based on this case,this paper compares the IFRS with the GAAP,and combines MM theory to improve accounting treatment of convertible redeemable preferred stock issued of Kuaishou Technology.This paper mainly studies from four aspects:（1）Combing the relevant issuance terms of convertible redeemable preferred stock issued by Kuaishou technology,and based on the international financial reporting standards,the preferred stock is included in the process of financial liabilities and related accounting treatment.It is found that the net profit of Kuaishou technology has been showing a huge “loss” after the convertible redeemable preferred stock was included in financial liabilities.However,Kuaishou technology’s operating income has been increasing;（2）To analyze the defects of accounting process of the convertible redeemable preferred stock,the impact of accounting process on financial statements and accounting information quality,and analyze the adverse economic consequences;（3）Put forward new accounting treatment schemes from different angles,including recording the changes in fair value into other comprehensive income,splitting the preferred stock,recognizing it as mezzanine equity with reference to GAAP and accounting treatment from the perspective of equity valuation;（4）At the end of this paper,we will make recommendations from different angles in view of the problems in the Kuaishou technology’s accounting process,and highlight the information disclosure under the Non International Financial Reporting Standards（Non-IFRS）. |
