pre acquisition dividend

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This topic contains 5 replies, has 5 voices, and was last updated by Avatar of MikeLittle MikeLittle 1 year, 12 months ago. This post has been viewed 791 times

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  • Avatar of hassanCh
    hassanCh
    Participant
    • Topics: 3
    • Replies: 2

    hi guys i just wanna know the treatmentment of dividend which is proposed before the acquisition but recieved after the aqcquisition in consolidated staetments.plz guyz help ,me in this complex adjustment.


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    mrjonbain
    Participant
    • Topics: 0
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    Any dividend paid by subsidiary out of preacquisition profits after the acquisition will effectively be a return of capital to the parent and therefore will reduce the cost of the investment in the goodwill calculation.


    Avatar of cuteleo110
    cuteleo110
    Participant
    • Topics: 5
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    cost of investment will be reduced with dividend amount!

    sorry for late reply


    Avatar of MikeLittle
    MikeLittle
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    • Topics: 0
    • Replies: 5485

    Hi

    I’m not sure about this! If it was proposed BEFORE the acquisition, then it will have been deducted in arriving at the net assets as at date of acquisition. Therefore, when the dividend is subsequently paid ( and received by the parent ) is it being paid out of pre-acquisition profits?

    I don’t know and I have to leave here in the near future. But, if I can face the prospect, then I’ll come back to it later

    Just as a reassurance, Steve Scott very rarely asks a problem involving pre-acquisition dividends and, when he does, the dividend was not proposed as at the date of acquisition.


    Avatar of sheikhshafiq
    sheikhshafiq
    Participant
    • Topics: 9
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    could anyone please write the double entry for this adjustment? in this scenario if there is dividend expense and dividend payable both presented in the accounts


    Avatar of MikeLittle
    MikeLittle
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    • Topics: 0
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    In Statement of Changes in Equity, Debit Retained Earnings with both the paid dividend and the DECLARED dividend ( if declared before the year end and therefore qualifies as an obligation )

    The paid dividend will have been credited to Cash

    The declared dividend will be credited to Current Liabilities

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