Hi
I am calculating my consolidated accounts, we have made a profit to date however, the amortisation charge to date is putting the retained profit into a negative.
Can I issue a dividend based on the profits?
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Replies (5)
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If the retained profits are negative then the Company does not have sufficient reserves to pay a dividend for that accounting period.
It may well be the case, supported by management accounts, including amortisation, that the reserves are now positive and it would be possible to declare a dividend as at today's date.
The consolidated accounts are irrelevant - it's the single-entity accounts of the entity which is hoping to pay the dividend where the distributable reserves position needs to be considered.
Agreed.
Occasionally I stumble across large quoted PLCs paying dividends where there appear to be no distributable reserves at the consolidated level but there are at the parent level- a Group being merely an accountant's construct with no legal existence.
Do remember in the parent to consider whether it needs to consider impairment of the investments in its subsidiaries on its balance sheet.