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Preferred dividend arrearage belongs in a dated, class-level equity analysis. A cumulative preferred dividend arrearage tracks preferences from prior periods that remain undeclared or unpaid. Maintain it by class and year because it affects priority, disclosure, and the basic-EPS numerator even when no payable has been recognized.
Apply it
If 10,000 cumulative $50-par, 8 percent preferred shares miss one annual dividend, the arrearage is $40,000. A second missed year raises the running preference to $80,000 before any current distribution is allocated.
Review preferred dividend arrearage against preferred stock. Reconcile preferred dividend arrearage to income available to common shareholders, the dated preferred dividend arrearage evidence, and its final presentation.
Keep the boundary clear
Time passing does not by itself create a declared dividend payable. The instrument creates the preference; a supported declaration creates the accounting obligation.
Authority
Read ASC 260-10-45-11 for preferred dividends in income available to common shareholders. Read ASC 505-10-50-3 for disclosure of an outstanding security's dividend rights.
Put the concept to work
Apply this concept
- Explain and apply preferred dividend arrearage within a reconciled class-level equity workpaper using supplied authoritative facts.
Learning resources
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Build on these ideas
- Preferred stock — Apply
To apply this concept: Required. This prior idea supplies the quantities or classification needed for the current analysis.