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ACCA Strategic Professional · Strategic Business Reporting (International) · Provisions, contingencies and events after the reporting period

Kestrel Group's reporting date is 30 June 20X6 and the financial statements were authorised for issue on 5 September 20X6. On 20 August 20X6 the board proposed a final dividend of $3 million, which shareholders will approve at the annual general meeting in October 20X6. Which treatment is correct?

No liability is recognised at 30 June 20X6, and the proposed dividend is disclosed in the notes. Under IAS 10, a dividend declared after the reporting period creates no present obligation at the reporting date, and dividends are equity distributions rather than expenses.

  1. ARecognise a liability of $3 million at 30 June 20X6 because it was proposed before authorisation
  2. BRecognise no liability at 30 June 20X6 and disclose the dividend in the notesCorrect
  3. CRecognise the dividend as an expense in profit or loss for the year ended 30 June 20X6
  4. DIgnore the dividend entirely until it is paid

Explanation

Under IAS 10, dividends declared after the reporting period are not liabilities at the reporting date because there is no present obligation. The amount is disclosed in the notes. Dividends are also distributions of equity, not expenses, so option 3 is wrong.

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