Dividends

Monday, August 29, 2022 3:22 PM

Types of Dividends:
1. Cash dividends
2. Property dividends
3. Liquidating dividends
4. Share/stock dividends – same or different class
5. Share received in lieu of cash dividends
6. Cash received in lieu of share dividends

Dates to consider related to dividends:

1. Date of declaration - This is the date on which the payment of dividends is approved by the board of directors
2. Date of record - This is the date on which the stock and the transfer book of the corporation is closed for registration.
Only those shareholders registered as of this date are entitled to receive dividends
3. Date of payment - This is the date on which the dividends declared should be paid

Between (1) and (2), the share are selling dividend-on.

-This means that when shares are sold after the date of declaration but prior to record date they carry with them the right to receive
dividends
Between (2) and (3), the share are selling ex-dividend.
-This means that the shares can be sold and still the original shareholder has the right to receive the dividends on payment date

When to recognize dividends as Income?

Dividends shall be recognized as revenue when the shareholders right to receive payment is established accordingly the dividends
shall be recognized as revenue on the date of declaration.

What if Shares are sold Dividend-on?

When dividends are declared the shareholder has already acquired the right thereto so much so that if the shares are subsequently
sold, the sale price normally includes the accrued dividends.
When shares are sold dividend on and the dividend is accrued specifically included in the sale price that portion of the sale price
pertaining to the accrued dividend should be credited to dividend income.

Types of Dividends:
1. Cash dividends
2. Property dividends
3. Liquidating dividends
4. Share/stock dividends – same or different class
5. Share received in lieu of cash dividends
6. Cash received in lieu of share dividends

Highlighted in red: - Recognized as Income

Liquidating dividends are not income, as these are return of capital

Share/stock dividends – same or different class – not income, total carrying amount of equity investment not affected, only cost per
share
Cash received in lieu of share dividends – not income, as if approach is applied.

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