What is the treatment of dividend received from pre acquisition profit?

lal Payment of dividend out of pre-acquisition profits only (1) If the holding company has received dividend from the subsidiary company out of profits made before the date of the purchase by the holding com- pany the dividends received are treated as a return of the purchase price.

Why is the pre acquisition dividend credited to investment?

profits are the reserves which exist in a subsidiary company at the date when it is acquired. Post-acquisition profits are profits made and included in the retained earnings of the subsidiary compan. Pre-acquisition dividend is generally deducted from the cost of the investment.

When dividend is declared from pre acquisition?

suppose u purchase shares of xyz ltd in april 2010….and the company declared dividend on those shares related to the f.y 2009-10….that dividend will be received by u coz your name is on the register… this is pre acquisition dividend which will be deducted from the cost of the investment.

What is Pre acquisition and Post-acquisition dividend?

Pre acquisition dividend is the dividend received out of pre-acquisition profits. Pre-acquisition profits are the reserves which exist in a subsidiary company at the date when it is acquired. Post-acquisition profits are profits made and included in the retained earnings of the subsidiary company since acquisition.

Are adjustments for post-acquisition dividends different from those for pre acquisition dividends?

Adjustments for pre-acquisition dividends are normally posted under the pre-acquisition entries, while adjustments for post-acquisition dividends are posted in the elimination entries for intragroup transactions.

How do you treat pre acquisition dividend received by holding company from its subsidiary company explain in detail?

Dividend received from the subsidiary company out of pre-acquisition profits. Thus the holding company deducts the amount of dividend received out of pre-acquisition profits from the balance of shares in subsidiary company account.

How do you treat pre acquisition profit?

Revaluation Profit or loss is always treated as capital Profit or Capital Loss i.e. Pre-acquisition Profit or Pre- acquisition Loss, hence, treated accordingly. It will increase the number of shares with the holding company and subsidiary Company.

What is pre acquisition?

/ (ˌpriːækwɪˈzɪʃən) / noun. the retained profit of a company earned before a takeover and therefore not eligible for distribution as a dividend to the shareholders of the acquiring company.

What is pre acquisition dividend and post-acquisition dividend?

What is pre acquisition period and post-acquisition period?

pre-acquisition period means any taxable period or portion thereof that ends on or before the Acquisition Date and, in the case of any Straddle Period that begins on or before, and ends after, the Acquisition Date, that portion of such Straddle Period that ends on the Acquisition Date.

Why do we exclude pre acquisition profits from the consolidated retained earnings calculation?

Pre-acquisition profits are the retained earnings of the subsidiary which exist at the date when it is acquired. These profits belong to the previous shareholders as they were earned under their ownership. The new parent cannot lay claim to these profits so they are excluded from group retained earnings.