A company declares an ordinary dividend of £40,000 after the year end but before the financial statements are authorised. How is this treated under IAS 10?
Answer and explanation
Correct answer: A. Not recognised as a liability, but disclosed in the notes
- Step 1: A dividend declared after the reporting period creates no obligation at the reporting date.
- Step 2: It is therefore a non-adjusting event: no liability is recognised.
- Step 3: It is disclosed in the notes if it is material.
Answer
Not recognised as a liability, but disclosed in the notes.
Why not the others: No obligation existed at the year end because the dividend was not declared until after it. The dividend is recognised in the period in which it is declared. A material non-adjusting event is disclosed in the notes.
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