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pre acqisition dividend

Arniv Sharda (CA Final) (3006 Points)

25 March 2011

friends

can you help me in understanding the concept of pre acquisition dividend with an example

thanks in advance

cheers

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2 Replies

Madhusudan Kabra (knowledge seeker) (1779 Points)
Replied 25 March 2011

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

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sivaram (Asst Mgr-Taxation) (6918 Points)
Replied 25 March 2011

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