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  • Proposed Dividends

    by Kamal Garg on Thursday, May 18, 2017 at 10:50 AM

    ABC Limited is 70% subsidiary of PQR Limited. Dividends were proposed by ABC Limited as at 31.3.2017. How should PQR Limited account for that Dividend and DDT and taxation (i.e. deferred tax on DDT) on it

    Replied byEditorial Board Friday, June 02, 2017 at 05:36 PM

    As per para 5.7.1A of Ind AS 109, Financial Instruments investor should recognise dividend only when the investor’s right to receive the dividend is established. Such right is establishes when the payment of dividend is approved by shareholders or the company has no discretion over payment of dividend.

    In your case, PQR Ltd. has proposed dividend, approval of which is still pending. So, there is no requirement of recognition of dividend proposed by ABC Ltd. in the standalone financial statement of PQR Ltd.

    Further, para 12 of Ind AS 10, Events after the Reporting Period provides that if an entity declares dividends after the reporting period, the entity shall not recognise those dividends as a liability at the end of reporting period.

    So, in your case dividend has not been declared as at 31.3.2017. Therefore, ABC Ltd. can’t recognise proposed dividend as liability in the standalone financial statement for the year ended 31.3.2017. Consequently, there is no question of accounting by PQR Ltd. of such dividend in the consolidated financial statement.

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