Distribution of Non cash Assets to Owners

The accounting treatment for the distribution of non-cash assets to owners is governed by Appendix A of Ind AS 10, Events after the Reporting Period. This appendix provides specific guidance on how an entity should account for non-reciprocal distributions of assets to its owners acting in their capacity as owners.

Key Accounting Principles

1. Recognition of Dividend Payable:

   • A liability to pay a dividend is recognized when the dividend is appropriately authorized and is no longer at the discretion of the entity.

   • This typically occurs when the dividend is declared by the shareholders or, if required by law/statute, approved by the relevant authority.

2. Measurement of Dividend Payable:

   • An entity must measure the dividend payable at the fair value of the assets to be distributed.

   • The carrying amount of the dividend payable is adjusted at the end of each reporting period and at the date of settlement, with any changes in the carrying amount recognized in equity as adjustments to the amount of the distribution.

3. Accounting at Settlement:

   • When the entity settles the dividend payable (i.e., distributes the assets), it recognizes the difference, if any, between the carrying amount of the assets distributed and the carrying amount of the dividend payable in the Statement of Profit and Loss.

4. Disclosures:

   • The entity must disclose:

     • The carrying amount of the dividend payable at the beginning and end of the period.

     • The increase or decrease in the carrying amount recognized in the period due to changes in the fair value of the assets to be distributed.

Summary

Under Appendix A of Ind AS 10, when an entity distributes non-cash assets to owners:

• Initial Measurement: Measure the liability at the fair value of the assets.

• Subsequent Measurement: Update the liability's fair value at each reporting date and at the settlement date, with the adjustment taken directly to equity.

• Settlement: Recognize any difference between the asset's book value and the liability's carrying amount in the Profit and Loss statement.

Distribution of non-cash assets to owners

This video provides a helpful overview of the accounting requirements for distributing non-cash assets to owners as outlined in Ind AS 10.