Dividends paid

mge
mge Registered Posts: 94 ? ? ?
Just wondering why dividends paid aren't treated on an accruals-type basis, but are recognised on the Financial Statements in the year they are paid (rather than the year to which they relate).

Any help would be much appreciated.

Comments

  • PGM
    PGM Registered Posts: 1,954
    I think its because its not a business cost, business don't have to give dividends.
  • Rinske
    Rinske Registered Posts: 2,453
    I thought it was because it won't be approved yet in the year it is due.

    The end of year dividend won't be decided and approved in the year, so you won't recognise them, until they are approved.
  • Nikdoug
    Nikdoug Registered Posts: 69 ? ? ?
    I think it goes by the date they are declared. Then if there are any dividends declared during the year that remain unpaid at the year end then these are disclosed in the accounts, however don't quote me as i have not come across this yet.
  • mge
    mge Registered Posts: 94 ? ? ?
    Many thanks for the replies. Very helpful :)
  • Steve Collings
    Steve Collings Registered Posts: 997
    Hi,

    Yes PGM is correct - dividends are merely distributions of profit as opposed to business "costs". In addition, FRS 21/IAS 10 also prohibits dividends being "backdated" in the financial statements i.e. declaring a dividend on 10 March but backdating it to the year-end 31 December.

    Best wishes
    Steve
  • mge
    mge Registered Posts: 94 ? ? ?
    Thanks Steve. That's very helpful.
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