IAS 19- Employees Profit sharing (dividends distributions)

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Marwamoh
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Joined: 26 Sep 2022, 19:38

IAS 19- Employees Profit sharing (dividends distributions)

Post by Marwamoh »

I have question about dividend distribution;

Our company is having retained earnings balance coming from more than ten years with no dividends distribution up to date.
According to law in Egypt, company should distribute 10% of profits to employees when taking the decision to distribute dividends to shareholders.

Currently, company intends to distribute dividends.
The question is; should employees share be calculated 10% of profit for the year or they have the right to get their portion of retained earnings as well.

Best Regards;
Marwa
Leo
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Joined: 05 Apr 2020, 22:31

Re: IAS 19- Employees Profit sharing (dividends distributions)

Post by Leo »

Dividend distribution means it can be taken from retained earnings (accumulation of profits over years) as long as certain criteria is satisfied depending on local law.

I don't think that's a IFRS related question, more of a company law related question depending on the country the company belongs to.
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Marek Muc
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Re: IAS 19- Employees Profit sharing (dividends distributions)

Post by Marek Muc »

If you pay something to employees that isn't related to their shareholding you need to recognise it as an expense under IAS 19, so debiting retained earnings without P&L charge wouldn't be in line with IFRS.

It doesn't matter that this payment is triggered by dividend to shareholders.
JRSB
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Re: IAS 19- Employees Profit sharing (dividends distributions)

Post by JRSB »

agree that the underlying question is more Egypt law but also that since the cash is clearly in exchange for employee services rendered and not in capacity as an owner then it's not an expense to record.
Leo
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Re: IAS 19- Employees Profit sharing (dividends distributions)

Post by Leo »

you mean it is an expense to record :)
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