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Dividend paid out by associate

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › Dividend paid out by associate

  • This topic has 1 reply, 2 voices, and was last updated 1 year ago by P2-D2.
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  • November 2, 2021 at 11:11 am #639767
    meogianac
    Member
    • Topics: 1
    • Replies: 0
    • ☆

    Hi Sir,

    I know that according to the equity method, the dividend paid out would reduce the value of investment in associates. But I can not understand the logic behind this. Could you make it clear?

    November 7, 2021 at 9:06 am #640127
    P2-D2
    Keymaster
    • Topics: 4
    • Replies: 6473
    • ☆☆☆☆☆

    Hi,

    The dividend is a distribution of the net assets of the associate to its shareholders. If you are distributing some of the net assets as a dividend then there will be a reduced amount of net assets following the distribution.

    I hope that clears it up for you.

    Thanks

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