When a subsidiary declares a final dividend payable to a parent who has a 100% interest in the subsidiary the parent recognises a dividend receivable and the subsidiary recognises a dividend payable. In addition to the elimination of these two items on consolidation, the following items must also be eliminated:

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On consolidation, intercompany transactions must be eliminated to avoid double counting. Since the parent company recognizes dividend revenue when the subsidiary declares a dividend, and the subsidiary records a dividend declared, these two items (Dividend declared and Dividend revenue) must be eliminated to accurately present the consolidated financial statements.

When a Subsidiary Declares a Final Dividend Payable to a Parent