Cash Flows/Dividends Reveived - Kaplan Revision Kit

anniebabe

I have been working through the Kaplan Revision Kit today.
I am a bit confused at the moment.
Question 7 - Dean Ltd - page 8
Question 8 - Rossington Ltd - page 14
Both of these questions are for Cash Flows, and have dividends received, but, in the answers - Deans Dividends are not deducted from operating activities - but Rossington dividend received are deducted.
Can anyone tell me what I am missing ? I was under the impression that we do infact deduct dividends received from operating activities, or is there some underlying rule that I have overlooked?
Thanks

Nps

IAS7 states that dividends can be classified as either a financing cash flow or an operating cash flow, depending on their nature and so long as they are treated consistently from one period to the next.

Do the two questions make some kind of distinction between the nature of the 2 dividends? It sounds like 1 question has deducted them from operating cash flow in order to add them to the financing cash flow, whereas the other one hasn't.

anniebabe

Hello Nps
The only difference I can see is that 7 Dean - in the body of the soci - is the sub title investment income underneath is dividends received and then interest received. 8 Rossington - dividends received are shown above admin and dist expenses.
I can not see anything else that is useful to my question.
Is the fact that in Qst 7 they have put Dividends under investing the reason why it is not shown in operating? only i thought it had to go there anyway - and operating.
Sorry if i sound a bit dim lol

Nps

I think you've probably hit the nail on the head. One has been highlighted as coming from an investment, and the other hasn't.

anniebabe

ok, thanks for helping me clear that up.

emuratty

Hi, I got confused with these 2 questions as well. However, when I re-looked at the question it was quite simple and they're testing if you understand your statements. The difference is that on Dean the Dividends Received is shown AFTER the Operating Profit and on Rossington the Dividends Received is BEFORE the Operating Profit. So on the Dean question you don't deduct them from the Operating Profit but on Rossington you do deduct them from the Operating Profit. When making the adjustments to your Operating Profit you need to look at what has been included when calculating it. Hope that helps