Valuation thru alternative method

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Haridas Pandarathil

Sr. Accountant

33 Points Posted on 20 October 2022

Dear Sir, I would like to get your advice on the investment valuation and payment of dividend. Company A invested Rs.1,00,000/- (including transaction cost of Rs.1000/-) in Company B in 2016. Company A showed the investment in BS as investment (capitalised the transaction cost also Rs.1000/-) total Rs. 1,00,000/-. Company B is not a listed company so the fair valuation of investment not done till today due to non availability of company B's valuation statement. Now 2022, Company B valued 10 times more. my question is 1. Company A is loss making company and no reserve in equity. Can the company pay dividend to the share holders. 2. how to account the investment valuation Gain in company A's books 3. From the investment gain Company A can pay dividend to its shareholders 4. if can pay dividend then how. Requesting your good advice and help to solve this problem

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Attached File : 839611 20221015222247 divident question.xlsx downloaded: 96 times

Replies (3)

Quick Summary

This discussion seeks guidance on investment valuation and dividend payments for Company A, which invested in an unlisted entity, Company B. Company A, a loss-making firm, needs to understand how to account for a significant valuation gain in Company B and whether it can pay dividends to its shareholders from this gain, especially given its own financial standing and lack of reserves.

Yasaswi Gomes new

Finance

3328 Points Posted on 21 October 2022

Im busy, for a gist, Co A invested in B. A is a loss making company. Since yove jnvested lesser than 20% of the wgole shares, youll treat it as trading investment. Company A doesnt need to have reserves to make investments. Dividends get paid to pref shareholders. Company A will het hain or loss on investment. Thats simple maths (fairvalue of investment*new market index/old market index) youll know the momentum and then subtract old value with new value after my formula. If you get negative balance its a loss oj investment or else gaun