Australia Ownership structure

[K Yip]

If my company owns 100% of the common shares of Company A while another unrelated company owns 100% of the preference shares of Company A, and my company and the unrelated company have a side agreement to evenly split the profit of Company A. How should I account the financials of Company A in my company's financials?

 

[DrStrangeLove]

It depends on how you define "evenly split the profit of Company A". Are the preference shares participatory? If so, then the preference shares count toward any dividends declared on common shares, and get common dividends on top of their preferred dividends. So there's no way to pay both preferred dividends and common dividends so that both companies get the same total amount.

 

[K Yip]

It's non participatory