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Sir, supposing and associate is acquired (30%) on 1 July for 300,000, the profit for the year is 25,000 and dividends paid in the end of the year is 5,000. Year end is 31 December
Will we deduct dividends paid from post acquisition profits and then add the share to the cost? Or do we deduct the dividends from total profit and then take the share of profits to cost?
Thanks
It used to be, years ago, that we time allocated the dividends.
But that nonsense has stopped and dividends are paid out of profits as at that date
So, in your example, the dividend will be deemed to be paid from the post-acquisition profits
There is an exception and it came up around 15/20 years ago
The subsidiary had only made losses since the date of acquisition but had sufficient retained profits to continue paying dividends
Those post-acquisition profits MUST have come from ore-acquisition retained earnings
Don’t worry about that! It’s most unlikely to happen again
OK?
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