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Cumulative preference dividends on EQUITY-classified preference shares for the current period are:
AIgnored entirely if no cash payment is made
BDeducted from numerator only when DECLARED
CAdded to numerator if not declared
DDeducted from numerator whether or not declared — the obligation accrues by passage of time
Answer & Solution
Correct answer: D. Deducted from numerator whether or not declared — the obligation accrues by passage of time
Cumulative preference dividends accrue and must be deducted in arriving at profit attributable to ordinary equity holders even if not declared. The amount paid in a later period (when arrears are cleared) is NOT deducted in that later period.
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