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Hello!
Sorry to disturb,I’m confused about one question
on 1 Feb 2003 piont acquired 30% of the equity of Noir for 10 million in cash
the post tax profit for the year to 30 Sep was 6 million profits accrued evenly throughout the year noir made a dividend payment of 1 millionand the answer is 10000+(6000*8/12-1000)*0.3
I cant understand why me should take the dividends paid prior to the aquisition into account? Besides dividends is paid by retained earning why would it have anything to do with the profit for the year?
Thank you in advanceDividends are normally treated as being paid out of the profits for the year to which they relate
The question probably says something along the lines of “a dividend for the year …”
It used to be the case, until relatively recently (maybe as recent as 20 or so years ago!) that we used to split dividends and, in a situation like you have posted, only 8/12 of the dividend would have been attributable to the post acquisition profits with the other 4/12 being deducted from the pre-acquisition profits
But then the standards committee decided that, although apparently conceptually sound, this made no commercial sense! How can you split a dividend and say that “Only $2,000 of this amount that I’m paying out comes from pre-acquisition profits and the other $4,000 comes out of our most recent profits”
So now dividends are taken as a single payment attributable to the perio and from the retained earnings / profits generated in the period during which the dividend is paid
As for your question about dividends being paid in the pre-acquisition period …. what has given you that idea that the payment DATE was ore-acquisition?
That would be a most improbable scenario
OK?
PLUS
Dear sir
I’ve also seen that “dividend proposed from S is directly reduced in RE thus it doesn’t make effect on PAT attributed to NCI” in my book.So I’m a little confused with the dividend payment problemSorry for taking your time to read this ,thanks in advance.
Thank you for your detailed explanation!
I sort of understand And I found that I made a MISTAKE I ignored an important information Noir made a dividend payment of “1 million on 1 September 2001 “The acquisition took place on 1 February, 2003 so what’s the relevance of a dividend payment that took place on 1 September, 2001
You’ve got me totally confused
Re your earlier post about dividends and PAT, a dividend is an appropriation of profits and is debited to retained earnings through the statement of changes in equity
In other words, it isn’t an expense and it doesn’t feature within the statement of profit or loss
Does that explain it?
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