Dividends paid between entities in the group should be:
A) Not permitted by the ultimate controlling entity because it does not make sense to exchange money between entities in the one economic group.
B) Reflected in the group accounts because it reflects the economic return the group earned by investing in the companies that form its operations.
C) Eliminated from the group accounts, but reflected in the individual legal entity accounts, since the group accounts reflect the many entities as one single economic entity.
D) Retained in the consolidated statements but disclosed separately as related-party transactions.
E) None of the given answers.

Question

Quizplus · Accepted Answer

Dividends paid between entities in the group should be eliminated from the group accounts because the group accounts reflect the many entities as one single economic entity. However, they should be reflected in the individual legal entity accounts. This is because dividends represent a transfer of profits within the group, which does not reflect any economic benefit to the group as a whole.

Dividends Paid Between Entities in the Group Should Be