Which of the following financial statements shows the dividends distributed to stockholders
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Dividends are distributions to owners or stockholders. They may be paid in cash, stock, or as dividends in kind. Show Cash dividends declared are generally reported as a deduction from retained earnings. As depicted in Figure FSP 5-1, dividends declared or paid are normally presented in the statement of stockholders' equity at the amount per share, and in total for each class of shares as required by S-X 3-04. In the absence of retained earnings, cash dividends should generally be charged to APIC. This treatment is supported by analogy to (codified in ), which requires accretion of redeemable preferred stock to be charged to APIC in the absence of retained earnings. A parent company may declare a dividend from other than its accumulated earnings (e.g., from APIC, unrecorded increases in value of the company, or retained earnings resulting from parent's equity in undistributed earnings of a subsidiary). Laws in many jurisdictions have restrictions on declaring dividends from other than a reporting entity's accumulated profits. Accordingly, whenever dividends are declared from other than a parent company's retained earnings, the reporting entity should consider obtaining an opinion of counsel as to the legality of the declaration. A reporting entity may also wish to record a dividend as an addition to accumulated deficit. The legal character of a dividend as a charge to accumulated deficit instead of APIC may be followed for accounting purposes when the dividend is not a legal return of capital. 5.11.1 Stock dividendsASC 505-20-20 defines a stock dividend as a dividend paid in the reporting entity's own shares. Like cash dividends, stock dividends declared are generally shown as a deduction from retained earnings and added to common stock and APIC ("permanent equity"). Unless this is done, the amount of earnings distributed will remain in retained earnings, leading stockholders to believe these distributions are available for further stock issuances or cash distributions. Therefore, the transfer from retained earnings should not be shown as an appropriation of retained earnings, but as a true deduction from retained earnings. Stock dividends declared or paid are normally presented in the statement of stockholders' equity at the amount per share and in total for each class of shares as required by S-X 3-04. In the year declared, the reporting entity should disclose the amount of retained earnings transferred to permanent equity. Further, as noted in FSP 5.5, S-X 5-02 requires disclosure of the number of shares issued and outstanding on the face of the balance sheet. When a stock dividend has been declared, but not issued at the balance sheet date, the sum of the number of shares declared as a stock dividend and the total number of shares outstanding should usually be disclosed on the face of the balance sheet. When there are multiple classes of shares, it may be appropriate to disclose this information in the footnotes. Figure FSP 5-4 illustrates two versions of this presentation on the balance sheet. Figure FSP 5-4 December 31, 20X1 Common stock — $10 par; authorized 200,000 shares; issued and outstanding 105,000 shares (including 5,000 shares declared as a stock dividend on December 29, 20X1, and issued on January 15, 20X2) $1,050,000 Or December 31, 20X1 Shares Amount Common stock — $10 par; authorized 200,000 shares Issued and outstanding 100,000 shares $1,000,000 Issued on January 15, 20X2 as a stock dividend 5,000 shares 50,000 105,000 shares $1,050,000 5.11.1.1 Stock dividend declared but not paidReporting entities may elect not to record a declared stock dividend and related per share effects if there is a reasonable basis for concluding that the dividend may be rescinded. Such a situation might exist when stockholder approval is required and scheduled for a date subsequent to issuance of the financial statements, and there are reasonable grounds to believe that stockholders will not approve the dividend. The reporting entity should disclose such a situation in the footnotes. If a balance sheet date falls between declaration and issuance of a stock dividend, the reporting entity should show the credit in stockholders’ equity on the balance sheet. The account is not shown as a liability because no corporate obligation is created by the declaration of a stock dividend (and the future payment of the stock dividend would not meet the definition of a liability under ). As such, reporting entities should not use the caption “stock dividend payable” because it may cause the reader to think of the item as a liability. We believe an appropriate presentation is a charge to retained earnings for the fair value of the stock dividend with an offsetting credit allocating the amount of the dividend between the capital stock account (at par or at stated value) and APIC in the same manner as would be done if the dividend were issued before the balance sheet date. This treatment eliminates any possible misinterpretation of the nature of the credit or its eventual disposition. We do not believe showing the credit as appropriated retained earnings or as a separate equity item, instead of being included in common stock and APIC, would adequately identify the amount as part of permanent equity. 5.11.2 Unpaid dividendsReporting entities often declare dividends on common stock before the balance sheet date, and then pay the dividends after the balance sheet date. Unpaid declared dividends other than stock dividends should be presented as current liabilities. However, if the dividend is payable in kind from noncurrent assets, the reporting entity should present it as a noncurrent liability. 5.11.3 Liquidating dividendsA distribution that represents a return of capital is a liquidating dividend. When a reporting entity pays such a dividend, usually on partial or complete dissolution, it should advise the shareholders and disclose the facts in the financial statements. The reporting entity may deduct "liquidating dividends" or "capital repayment" from APIC in the balance sheet or show only the balance of capital after partial liquidation. Figure FSP 5-5 is an example of a footnote to disclose liquidating dividends. Figure FSP 5-5 Note X — Cash dividends paid during the year 20X1 equaled $1.00 per share on the $3.00 par value common stock, of which $0.30 represented a liquidating dividend paid from APIC. 5.11.4 Stockholders' rights plans ("poison pill" takeover defenses)To discourage unfriendly takeover attempts, reporting entities may adopt plans under which rights are granted to existing stockholders that convert to common stock upon the occurrence of certain events, such as the accumulation of a significant percentage of the reporting entity's outstanding shares by a single stockholder. These plans are sometimes referred to as "poison pill" takeover defenses and have the characteristics of a dividend. Reporting entities with poison pill takeover defenses should disclose in their footnotes the terms of the plans, including events that cause conversion, the potentially dilutive nature of the plan, and call provisions, if any. Accounting for these plans is addressed in FG 8.5. 5.11.4.1 Earnings capitalized in prior yearsSome reporting entities disclose the amount of cumulative retained earnings capitalized in prior years as a result of stock dividends and other authorized transfers. However, if the transfers are fully disclosed as they occur, there is no requirement for a cumulative disclosure. 5.11.4.2 Fractional sharesStock dividends almost always create fractional shares. Frequently, the reporting entity pays cash in lieu of issuing the fractional shares and reduces retained earnings for the cash payment. When the balance sheet date is between the date of declaration and the date of distribution, and the amount to be paid in cash is determinable, it is typically classified as dividends payable. The reporting entity may show the charge to retained earnings as a separate item or as part of the stock dividend caption in the statement of stockholders' equity. If the amount is not determinable, the reporting entity generally describes the transaction. PwC. All rights reserved. PwC refers to the US member firm or one of its subsidiaries or affiliates, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details. This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.
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Your recent searchesSuggested termsSuggested guidanceWarning 2{{isCompleteProfile ? "Setup your profile before Sign In" : "Profile"}}{{editProfile.email}} First name* {{validation.firstName.errorMessage}}Last name* {{validation.lastName.errorMessage}}Country or region* Required fieldFunctional role* Required fieldIndustry* Required fieldCompany* Company name must be at least two characters longNewsletter (optional) Yes, subscribe to the newsletter, and member firms of the PwC network can email me about products, services, insights, and events. Terms of Compliance* By providing your details and checking the box, you acknowledge you have read the Privacy Statement and Terms of Use (including the sections in each related to Registered Users).* Required fieldWhat financial statement shows the dividends distributed to stockholders?Investors can view the total amount of dividends paid for the reporting period in the financing section of the statement of cash flows. The cash flow statement shows how much cash is entering or leaving a company. In the case of dividends paid, it would be listed as a use of cash for the period.
Which financial statements show dividends?Dividends are not reported on the income statement. They would be found in a statement of retained earnings or statement of stockholders' equity once declared and in a statement of cash flows when paid.
Are dividends shown in profit and loss account?Cash or stock dividends distributed to shareholders are not recorded as an expense on a company's income statement. Stock and cash dividends do not affect a company's net income or profit.
Are dividends on the statement of stockholders equity?Dividends are not specifically part of stockholder equity, but the payout of cash dividends reduces the amount of stockholder equity on a company's balance sheet. This is so because cash dividends are paid out of retained earnings, which directly reduces stockholder equity.
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