Dear Final Students,
I will be covering few series of Revision for CA/CWA final students in the topics - Fin reporting, Fin Management & Income tax.
Please follow my postings for regular updates for next 2 months. Students in bangalore can meet me if you would like to attend classes or others can write to me at tejas @ tejas.co.in .
1. While asking questions - be clear about what you would like to clarify ? questions need to brevity and to the point
2. Aggregate all your queries and try to send one email which wil be easy to handle
3 . Expect delays upto 3 days to respond to your mail - All mails will be read.
Consolidation of Financial Statements : Dividend Treatment
We will discuss here few scnearios - on how to deal them and also understand the concept
a. Acquisition at the start of the year :
Dividend declared and paid for the previous year and credited to holding company in P&L account shoudl be treated as preqacquisition dividend . Also dont forget to take care of Dividend tax if any
So for ex : Profit & Loss Account ( Now in New Schedule VI this shoudl be called as Statement of Profit & Loss Account) as at end of year balance sheet is 30 lakhs, and opening is 20 lakhs. The dividend needs t obe paid out Subsidiary company and be adjusted from the opening balance . Assuming dividend is 15 lakhs, the balance unadjusted will be Rs. 5 lakhs. This 5 lakhs must be deducted from the end of year balance at Rs.30 lakhs and Profit earned for the year woudl be Rs.25 lakhs
b. Acquisition during the year.
If proposed dividend is declared for the year, Share of Holding company for the Pre acquisition period must be reduced from Cost of investment . Post acquisition dividend must be added to the reserves
c. Shares Acquired start of the year but Dividend paid out preacquisiton profits.
The problem if it states that Dividends have been paid @ x% - and if Dividend is being paid out of pre acquisition profits and no dividend is proposed for current year. In such scneario - adjust the dividend paid out of pre acqn profits and the balance un adjusted from opening must be reduced from the total profits to arrive at Subsequent years profit
d. Shares acquired start of the year and also have Bonus shares issued during the year.
In this scneario while calculating proposed equity dividend for the curren tyear - calculate Dividend including bonsu share .and reduce this from the earnings duirng the year
e. Preference Dividend has to be paid first before providing equity dividend
f. interim Dividend and final dividend treatment can be adjusted from pre aqcn & post acquisition based on relevance to the qusetion being asked
Tip to Study consolidation financial statement :
Understand Concepts clearly
Revise concepts - across Problems
Dont ignore study materia/practice manual.
Hope all is ok - do write to me with your feedback at tejas @ tejas.co.in
Tejas learning centre
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