Dhrunil Bhatt (Chartered Accountant) 29 April 2018
On 2nd of May, 2018, I have my CA Final Exam on Paper - Financial Reporting. And I have one doubt regarding one of the very important adjustment in Consolidated Financial Statements. It is my request that you consider it as very urgent please. This question would cost me 16 Marks. Hope that you all can understand my situation.
Due to Revised AS 4 wherein if the company has proposed dividend after the balance sheet date then it is considered as a non adjusting event and only disclosure by way of notes to accounts is made. No adjustment in books of accounts shall be made.
In the below individual points, I have given various situations and its treatment in the Consolidated Financial Statements as per my understanding. Kindly correct me if I am wrong in any of the adjustment :
(1) On the liability side of the balance sheet, " Proposed Dividend " is shown in both Holding and Subsidiary Company. No additional information provided in the question :-
Ans : As per my view, this is not in accordance with the Revised AS 4 and therefore the impact of the same should be nulified by reversing the entry. I.e. for holding company, the amount of proposed dividend should be added while calculating the consolidated profit and loss account and for subsidiary company, it should be added to the profit and loss account and the revised balance of profit and loss account of such subsidiary company shall be used while preparing Analysis of Capital and Reserve of the Subsidiary Company
(2) The additional information in the question provides that - " Both the companies i.e holding and subsidiary has PROPOSED EQUITY dividend @ 10% "
Ans : As per my view, since no adjustment has been made in the books of accounts and as per revised AS 4 no adjustment is required as such, thus this treatment shall be ignored. No impact shall be given for this adjustment.
(3) The additional information in the question provides that - " Both the companies i.e holding and subsidiary has DECLARED EQUITY dividend @ 10%"
Ans : As per my view, since the company has DECLARED the dividend (and not proposed), thus it is now certain that the payment has to be made, therefore the relevant Para of Revised AS 4 is not applicable and therefore below shall be the treatment
I would be very grateful to you if you reply me as soon as possible as I have exams on 02nd of May.
Thanks and Regards,