Dividends may be identified as being paid out of pre-acquisition or post-acquisition profits by a subsidiary company.Where dividends are paid out of post-acquisition profits the investment in the subsidiary should be decreased by the amount of the dividend.

Question

Quizplus · Accepted Answer

Dividends paid out of post-acquisition profits are considered a return on investment and are recorded as income in the investor's income statement, not as a decrease in the investment value on the balance sheet.

Dividends May Be Identified as Being Paid Out of Pre-Acquisition