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ACCA Applied Knowledge · Financial Accounting · Disclosure notes

Which of the following statements about dividends and IAS 10 is correct for an entity with a 31 December 20X5 year end?

The dividend is not recognised as a liability at 31 December 20X5, because no obligation existed at that date, but it is disclosed in the notes. Dividends declared after the reporting period are non-adjusting and are accounted for in the following year.

  1. AA final dividend declared on 20 February 20X6 is recognised as a liability at 31 December 20X5
  2. BA final dividend declared on 20 February 20X6 is not recognised as a liability at 31 December 20X5 but is disclosed in the notesCorrect
  3. CA final dividend declared on 20 February 20X6 is deducted from retained earnings in 20X5 but not shown as a liability
  4. DA final dividend declared on 20 February 20X6 is an adjusting event if it relates to profits earned in 20X5

Explanation

Dividends declared after the reporting period are not a liability at the reporting date as there was no obligation then. IAS 10 requires disclosure in the notes as a non-adjusting item. They are recognised in the period when declared.

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