Although preferred shares will be treated as equity even if for accounting purposes they are classified as debt, "the amount of the retained earnings that is reflected on the balance sheet is used for purposes of subsection 18(4) notwithstanding that retained earnings may have been reduced by the amount of the increase in the carrying value of the preferred shares."
High-low preferred shares that are reclassified as debt for accounting purposes will be treated as equity although, by virtue of s. 181(3), the value to be assigned to those shares will be the amount reflected on the corporation's balance sheet.
