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Divident Received from subsidiary clarification

This topic has 3 replies, 2 voices, and was last updated 1 week ago by P2-D2.

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February 22, 2021 at 10:12 am #611294
StefanosG
- Topics: 19
- Replies: 12
Dear Tutor,

So let’s say that we have a parent named Tigre that owns a 80 percent of Zebra. Zebra at 31 of December declared a dividend of 10.000. Year end is December.

Could you please help me how would i treat this in the consolidated SPL SFP and the consolidated group retained earnings?

Tigre retained earnings is 20.000
Zebra retained eranings is 3.000

My solution is eliminate the 10.000*80 =8000 from the subsidiary in the spl.

Group retained earnings.
Tigre. 20000
3000*80%. 2400
Less divident. 8000

Total. 14.400

Thank you!
February 22, 2021 at 9:17 pm #611373
P2-D2
Keymaster
- Topics: 4
- Replies: 5046
Hi,

The dividend received from the subsidiary is eliminated on consolidation of the group SPL, so your understanding is correct.

You do not need to make any adjustment in the group SFP.

Thanks
February 23, 2021 at 2:57 pm #611445
StefanosG
- Topics: 19
- Replies: 12
Hello,

So the income from the divident is not adjusted in the retained earnings column of the parent as received nor deducted from the subsidiary ?

Thank you.
February 24, 2021 at 8:23 pm #611577
P2-D2
Keymaster
- Topics: 4
- Replies: 5046
Hi,

No, the accounts of the subsidiary need to be correct first, prior to any adjustments. The dividend income is therefore included within the parent’s retained earnings.

Thanks
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