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Treatment of Dividends in Consolidation – As 21

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Treatment of Dividends in Consolidation – As 21 TREATMENT OF DIVIDENDS IN CONSOLIDATION – AS 21 Preference Always assume that Preference shares are Cumulative if nothing is Dividend specified in the question. In case of Cumulative Preference Dividend, whether or not Dividend is declared by Subsidiary co., it should be considered while preparing CFS. First of all, check the Balance Sheet of Subsidiary co., when preference dividend payable in shown in Liability side or not. If it is shown in liability side, that means dividend is already provided for and deducted from Profit and Loss account of subsidiary co. (means entry is passed) If it is not shown in liability side, then entry of providing preference dividend has not been passed yet. Apply following steps- a. In AOP Add back the preference dividend only if entry is already passed. b. Make Time adjustment c. Deduct the preference dividend from Pre-Acquisition if dividend belongs to Pre Period and deduct it from Post-Acquisition if dividend belongs to Post Period. d. If this dividend is receivable by Parent then share of parent will be transfer to Investment account if it Pre-acquisition OR P&L of Parent if it is Post-acquisition e. MI’s Share in dividend will be shown as Short Term Provisions separately. Equity 1. Two types of Dividends Final Dividend and Interim dividend Dividend 2. Dividend Received by Parent can be: • Pre-acquisition : to be adjusted in COC (i.e. deducted from investments) • Post acquisition : to be transfer to Cons. P&L A/c of Holding (Agar pre acquisition dividend galti se p&l me daal diya parent ne to vaha se hatana padega to minus karenge and COC me dalna padega to vaha pe bhi minus karenge) 3. We always assume that: • Dividend paid is Final if question is silent • Pre-acquisition dividend received by parent is wrongly credited to its P&L A/c • Entry of Provision for Dividend has not been made in the immediately preceding year. 4. Treatment of Dividend declared and paid in AOP (Assuming Dividend is declared in AGM in the Next Year): • Added back to the profits from where it has been appropriated. • Apply time adjustement • Deduct dividend from its actual source of profits i.e. Pre acquisition or Post acquisition. 5. Final Dividend source is profit of last year and moving backwards and Interim Dividend source is profit of current year upto the date of distribution. 6. CDT will be appropriated just like dividend, but it will not be received or rectified by parent. 7. Dividend is declared in AGM and AGM is conducted after BS date therefore declaration of Dividend after BS date is considered as Non- Adjusting Event as per AS 4 & IndAS 10. Therefore on BS date dividend is treated as Contingent Liability only and it is provided for only in the next year (i.e. in the year of declaration). (Matlab ye ki jis saal me dividend propose/declare kiya hai ussi saal me record karo) However, if the question states that dividend is declared before or up to balance sheet date then it is to be provided for in the Balance sheet of the year for which it belongs. Treatment depends on following: (a) Dividend entry has been passed already (i.e. in BS dividend payable is shown) Add back the dividend in AOP Make Time Adjustement of Post Acquisition Profit Deduct it again from Pre acquisition or Post acquisition as the case may be. (b) Dividend entry has not been passed (i.e. in the BS dividend payable is not shown) No need to Add Back (since entry is not passed) After Time Adjustment deduct from Pre or Post as the case may be. 8. Dividend is calculated on paid up share capital • At the end of the year in case of Final Dividend • On the date of Distribution for Interim Dividend .
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