pre acqisition dividend

Pre acquisition dividend is amount recived as dividend after acqusition of shares which is realted to period before share purchased . Pre acquision dividend is deducted from the cost of investment. If there is excess of pre acquisition dividend over cost of investment it  will genrate capital reserve.

Regards

Madhusudan

Presume a Holding company acquires subsidary on 01.01.2003  say 80% of its holdings and Subsidary declares dividend for 2002 in the year 2003 and the dividend which is now received by Holding company from subsidary for the year 2002 is preacquistion dividend which ultimately goes to reduce the cost of Investment  and Reserves of Holding Comapny