income appeared

Discussion in 'CB1' started by Pxliang, Aug 8, 2019.

  1. Pxliang

    Pxliang Active Member

    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 ?
     
  2. lotstodo

    lotstodo Member

    It says consolidated accounts. Cancels out ??
     
  3. Pxliang

    Pxliang Active Member

    2014 April No 8
    why dividend is not included in calculation ?
     
  4. Lynn Birchall

    Lynn Birchall ActEd Tutor Staff Member

    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
     

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