2014 April No 8 A parent company owns a 30% holding in an associate. The associate’s profit for the year is £8m. The associate paid a dividend of £6m. How much income will appear in the parent’s consolidated statement of profit or loss (or income statement) in respect of this associate? Can I know why the answer given is only 8m* 30 %, why dividend is not included in calculation ?
Hi It is part of the cancelling out of double-counting and relationships within a group when consolidating In particular, the dividends(£6m) the associate pays are paid out of its profits (£8m). We only need to include the parent's share of the profits, to also include the dividend would be double-counting. Hope this helps Lynn
