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Treatment of proposed dividend in consolidation

02 February 2013

Can anybody tell me treatment of proposed dividend(equity and preference) in consolidation....plz help me out.... P.S. I took classes from praveen sharma sir. I waill appreciate if any praveen sir student can help me out.....

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2 Replies

taufir alam (Article) (73 Points)
Replied 24 February 2014

Smart way to solve proposed dividend prob(s).

Remember that proposed dividend is linked with current year Prfit and mowing backward.

1. for dividend proposed by subsidiary and no effect is given in the bookes

poposed dividend are to be shown under the head of current liabilities rather than mereged with the Minority interest . inother word calculate the minority interest ignoring proposed dividend and reduce the minority intt by the amount of share of minority interest in the proposed dividend thereafter transfer that into the head current liability in the name of proposed dividend(minority interest)

If effect taken by Subsidiary Co. and not by Parent company.

if parent Co. had not taken into account the effect of the proposed dividend by subsidiary and subsidiary Co. has taken effect, then increase the CPL by the amount of share of divend of the holding company in the said proposed divedend, proposed by subsidiary.

2. for dividend proposed by perent and if no effect given in the books

do nothing just reduce the proposed dividend from CPL by the amount of proposed dividend and transfere it to proposed dividend under the head of current liabiliies.

however, if effect of proposed dividend is given in the books of perent co the no entry is to be made.

may be you are helped by this helping hand.

dear friend

further , in the whole thing above i am just woundering why proposed dividend for the year is linked with the current year profit whereas final dividend is linked with last year profit................please solve this issue if any one is there to help.

thanks to you all in advance.

Shirzad Shroff (3rd year Articled Clerk) (22 Points)
Replied 03 August 2014

Final dividend is assumed to be the last years dividend paid out of current year profit whereas proposed dividend is dividend proposed which means it still has to be accepted by shareholders at AGM and then paid. So it would relate to current year. Remember the final dividend is based on an accounting assumption that it relates to the previous year but paid in current year.