<P> The word arrears is used to mean "past due" when describing the past, omitted dividends on cumulative preferred stock . If a corporation fails to declare the preferred dividend, those dividends are said to be in arrears . The dividends in arrears must be disclosed in the notes (footnotes) to the financial statements . (Cumulative preferred stock requires that any past, omitted dividends must be paid to the preferred stockholders before the common stockholders will be paid any dividend .) </P> <P> The word arrears is used to mean "end of period" when referring to annuities (an annuity is series of equal amounts occurring at equal time intervals, such as £ 1,000 per month for 20 years). If the recurring amount comes at the end of each period, the annuity is described as an annuity in arrears or as an ordinary annuity . A loan repayment schedule is usually an annuity in arrears . For example, you borrow £ 10,000 on September 30 and your first monthly payment will be due on October 31, the second payment will be due on November 30, and so on . </P> <P> An in - arrears swap is an interest rate swap that sets (fixes) the interest rate and pays the interest at the end of the coupon period . In contrast, a standard swap sets the interest rate in advance, at the beginning of the coupon period, and pays the interest in arrears, at the end of the coupon period . The same distinction holds for other interest rate derivatives, e.g. caps, floors and swaptions . </P>

Meaning of calls in arrears and calls in advance