If a subsidiary makes a dividend payment out of pre-acquisition earnings,the parent entity should consider whether its investment in the subsidiary is impaired.

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If a subsidiary makes a dividend payment out of pre-acquisition earnings, it can indicate that the subsidiary is not generating enough current earnings to fund the dividend payment, and the parent entity should consider whether its investment in the subsidiary is impaired. This is because the subsidiary may be relying on past earnings to fund the dividend instead of generating current profits, which could indicate a decline in the subsidiary's financial performance and value. Therefore, the parent entity should evaluate the impairment of its investment by considering the subsidiary's current and future financial performance and market conditions.

If a Subsidiary Makes a Dividend Payment Out of Pre-Acquisition