A dividend paid by a subsidiary out of pre-acquisition profits will always result in the parent company's investment in subsidiary asset being impaired.

Question

Quizplus · Accepted Answer

If the dividend paid by the subsidiary out of pre-acquisition profits does not exceed the parent company's share of those profits, then it will not result in the impairment of the parent company's investment in the subsidiary asset. However, if the dividend exceeds the parent company's share of pre-acquisition profits, then the excess will result in the impairment of the parent company's investment in the subsidiary asset.

A Dividend Paid by a Subsidiary Out of Pre-Acquisition Profits