Measurement of Investment Where the Dividend is Declared With a Future Record Date

Ind AS 109, Financial Instruments, states that dividends are recognized in profit or loss only when:

(a) the entity’s right to receive payment of the dividend is established;

(b) it is probable that the economic benefits associated with the dividend will flow to the entity; and

(c) the amount of the dividend can be measured reliably

Further, dividends on investments are recognized in profit or loss in accordance with provisions of Ind AS 109 unless the dividend clearly represents a recovery of part of the cost of the investment.

This story discusses a case where the company has acquired shares of another company at a price including the dividend, and the dividend is declared with a future record date. The confusion is whether company shall recognize this dividend in the statement of profit and loss account or consider it as pre-acquisition dividend and reduce it from the cost of investment.

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