I have been told by a colleague who is studying accounting that our current accounting policy in relation to dividend may not be correct or in accordance with accounting standards. My colleague stated that many public companies have dividend policies, which have been communicated to shareholders as to the amount of the fully franked distribution, which will be paid to shareholders. It may be argued that such a policy provides the company with a constructive liability to pay the dividend. Currently, the dividend is not treated as constructive liability in Cairns Ltd. Could you please advise whether the constructive liability should arise?
I have been told by a colleague who is studying accounting that our current accounting policy in relation to dividend may not be correct or in accordance with accounting standards. My colleague stated that many public companies have dividend policies, which have been communicated to shareholders as to the amount of the fully franked distribution, which will be paid to shareholders. It may be argued that such a policy provides the company with a constructive liability to pay the dividend. Currently, the dividend is not treated as constructive liability in Cairns Ltd. Could you please advise whether the constructive liability should arise?
Chapter15: Dividend Policy
Section: Chapter Questions
Problem 6P
Related questions
Question
I have been told by a colleague who is studying accounting that our current accounting policy in relation to dividend may not be correct or in accordance with accounting standards. My colleague stated that many public companies have dividend policies, which have been communicated to shareholders as to the amount of the fully franked distribution, which will be paid to shareholders. It may be argued that such a policy provides the company with a constructive liability to pay the dividend. Currently, the dividend is not treated as constructive liability in Cairns Ltd. Could you please advise whether the constructive liability should arise?
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
Recommended textbooks for you
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:
9781337514835
Author:
MOYER
Publisher:
CENGAGE LEARNING - CONSIGNMENT
Business/Professional Ethics Directors/Executives…
Accounting
ISBN:
9781337485913
Author:
BROOKS
Publisher:
Cengage
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:
9781337514835
Author:
MOYER
Publisher:
CENGAGE LEARNING - CONSIGNMENT
Business/Professional Ethics Directors/Executives…
Accounting
ISBN:
9781337485913
Author:
BROOKS
Publisher:
Cengage