in holding & subsidiary, dividend proposed before date of acquisition & paid after acquisition in that case why the such amount which is received is credited to investment a/c?
how can we byfercate in revenue profit or capital profit?
what is the treatment in case this amount wrongly credited to profit and loss a/c?
Dividend out of reserves and profits pertaining to the preacquisiton period is treated as capital profit and this will be deducted from the cost of investments. Any other dividend subsequently received will be revenue profits and this will be taken as an income in the holding companys stand alone financials and while consoidating, the same will be eliminated against the dividend paid by the subsidiary. In case it is proposed dividend in subsidiary, this will form part of the Holding companys share in the net results of the subsidiary. And no elimination is done.
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