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Hello sir, I’m not quite clear about the treatment of intra-group dividend in such a question requiring us to prepare both consolidated SoPL and consolidated SoFP and subsidiary acquired mid-year. I rarely seen any of such question in textbook or past year exam. Is it out of scope of F7 ?
1. What is the double entry for cancellation of intra-group dividend ?
In my lecture notes, it is :
DR Investment income (in SoCI)
CR Retained earnings (in SoFP)But I’m not sure which RE to credit, parent’s or subsidiary’s ?
Because if we credit to sub’s RE, it will in turn increase NCI’s share of post acquisition profit. Otherwise, if we credit to parent’s RE, it will increase group’s RE only
Or actually, is it that which one to credit doesn’t matter ?2. Does intra-group dividend appear in the calculation of group’s RE and NCI ? If yes, where does it appear ? Or does dividend paid in the year by subsidiary affect the carrying amount of group’s RE or NCI in SoFP ?
3. Where does the portion of dividends paid to NCI appear ?
In statement of changes in equity as a debit to NCI ?Actually, I am trying to prepare a consolidated SOFP for question 1 Pandar – Dec 2009. But the retained earnings carried forward I calculated does not agree with retained earnings brought forward (as per question) + profit for the year attributable to parent (according to the SoCI).
When preparing statement of profit or loss, simply do not have an income line for dividends (unless there are dividends received from outside the group)
When preparing the consolidated retained earnings, it’s the same old song:
H’s own
+
H’s share of S post-acq retained
–
Goodwill impaired since acquisition (just our share)
So, for H’s share of S post-acq retained, we need to deduct the S dividend IN FULL from the S column and add H’s share of that dividend in the H column
Don’t, please don’t, start getting into debiting this and crediting that.
Just follow those rules that I’ve set out for you
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