ACCA Applied Knowledge · Financial Accounting · Statement of profit or loss and other comprehensive income
Orion plc has 4,000,000 equity shares of $1 each. During the year it paid an interim dividend of $0.05 per share and declared, after the year end, a final dividend of $0.08 per share. Profit for the year was $900,000. Which statement is correct for the year's financial statements under IFRS?
Only the $200,000 interim dividend is recognised, in the statement of changes in equity. The final dividend was declared after the year end, so it is a non-adjusting event that is disclosed only. Dividends are never an expense in profit or loss.
- AProfit for the year is reduced by $520,000 for dividends in the statement of profit or loss
- BThe final dividend of $320,000 is recognised as a liability at the year end
- CDividends of $200,000 are shown in the statement of changes in equity and the final dividend is only disclosedCorrect
- DDividends of $520,000 are shown in the statement of changes in equity
Explanation
Dividends are distributions of equity, not expenses, so they do not appear in profit or loss. Only the interim dividend of 4,000,000 x $0.05 = $200,000 was paid in the year. The final dividend declared after the year end is a non-adjusting event, so it is disclosed, not recognised. Including $520,000 wrongly accrues the final dividend.
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