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P2-D2.
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accastudent48
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When calculating the group retained earnings, the dividend given by associate is eliminated and the share of profits of associate is included. Similarly, we remove the dividend received from subsidiary in the CSPL, so why do we not eliminate the same from the group retained earnings like we do for associates?
The group retained earnings include the current year’s profits and hence the investment income, so should it not be eliminated from there as well?
P2-D2
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Hi,
The treatment of a subsidiary and associate is different. We consolidate the subsidiary and equity account for the associate.
The dividend paid by P to S has already been eliminated in the group retained earnings when it was declared/paid, so we do not need to remove it.
Thanks
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