AS-13
shivanshu tiwari (17 Points)
16 March 2018
Why the pre-acquisition dividend is adjusted against the cost of investment?
2 Replies
Balaji Sarangarajan
(MBA & (CA Final))
(1131 Points)
Replied 16 March 2018
Pre acquisition dividend is treated as part of cost if they clearly represent a recovery of part of the cost as per AS 13.
satish
(teaching)
(2046 Points)
Replied 16 March 2018
We can understood this topic with the help of fixed income investments.
Ex: seller of 12% Debenture @ 100 (face value=100) each can quote either at Cum-interest price or Ex-interest price. what ever the quoted price seller is going to recover the amount of interest upto the date of sale from 1st april (for his holding period). If date of transfer is on 30th sep, periof of holding by seller is 6 months. so seller can recover Rs. 6/- from buyer on date of transfer.
Income can be finalise on date of transfer under fixed income investments, but where as under variable income investments (equity shares) no one can finalise income for seller holding period.
as per seller quoted price per share includes dividend income for his current year holding period.
As per Buyer: Cost of investment includes dividend which is relavent to pre-acquisition period.
when investor got the right to receive dividend-
1. dividend for the post-acquisition period is our profit (so it is transferred to profit and loss a/c)
2. Dividend for pre-acquisition period is adjusted with cost of investment.
cost of invetment as on the date of purchase is including preacquisition dividend. (share value + dividend)
cost of investment on the date of receipt of dividend is only share value. (pre-acquisition dividend is adjusted with cost of investment)
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