Hyflux raised $400 million from perpetual preference shares in 2011 and $475 million in perpetual capital securities in 2014. These instruments carry a cumulative dividend of 6% a year and would be classified as financial liabilities — but for the company’s right to defer the cash payments indefinitely. Under FRS 32, this unconditional right allows the instruments to instead be presented as equity.
Such financial engineering means the company was able to remove the “dividends” as opposed to “interest payments” from its profit-and-loss statement, thereby giving the illusion of higher profits.
For instance, the company paid dividends on both perpetual securities totalling $269.8 million between 2011 and 2017. If the dividends were interest payments, the reported pre-tax profit totalling $156.1 million for the entire period would turn into a loss of $113.7 million.
Total compliance in financial reporting, but was it misleading?
https://www.theedgesingapore.com/portfo ... misleading