PY Dividends Elimination

[Neuromancer81]

Dear Experts,

please consider the following case:

On Dec 2023, company X (100% owned by the parent Z) declares 1Mln€ of final dividends to company Y (70% owned by the parent Z).

Hereunder the elimination treatments I put in place to ajust aggregated income and balance sheet statements:

1st Entry:
- Debit the Dividends Income Account (Decreasing Net Income) - 1mln€
- Credit the Retained Earnings Reserve (or other appropriate equity reserve) - 1mln€

Am I finished? I don't believe so...

Since the decrease of Net Income should roportionally affect Owners and Minorities, I need to:

2nd Entry:
- Debit Minority Interest Income Account (Cost) (Increasing Owners Income) - 300k€
- Credit Non-Controlling Interests Reserve - 300k€

Am I right? If yes than I have another question:

On Jan 2024 (nothing is changing in terms of ownerships and consolidation methods), company X's net income will be appropriated into retained earnings reserves and non-controlling interests. PY net income however was containg 1mln€ of intercompany dividends. When I first consolidate figures in 2024, say in the 1st Quarter close, should I take into account prior year dividends? In other words, should I re-do the 2nd entry as follows?...

- Debit Retained Earnings - 300k€
- Credit Non-Controlling Interests Reserve - 300k€

Many thanks in advance for your time and patience.

[Marek Muc]

I'm moving this to 'General accounting and financial reporting discussion', please use the relevant forum for your next topics, thanks!

[Marek Muc]

On Dec 2023, company X (100% owned by the parent Z) declares 1Mln€ of final dividends to company Y (70% owned by the parent Z).

If company X is fully owned by Z, why does it pay dividends to Y?

[Neuromancer81]

You are right. Please read as follows:

"On Dec 2023, company X (100% owned by company Y) declares 1Mln€ of final dividends to company Y (70% owned by the parent Z)..."

[Marek Muc]

Are you using consolidation software? Do you have any questions about how the *final* consolidated results should appear?

[Neuromancer81]

Yes I am using consolidation software. But I am mainly interested in understanding how results should appear in Q1 2024 from a functional perspective. To me, in Q1, it' not correct that I recognize minority interests on Retained Earnings as if these retained earnings are still containing the dividends income. This dividends income was eliminated on prior year, and the effect of that elimination should be also affecting data rolling forward.

[Marek Muc]

So could you rephrase your initial question to focus on the final outcome rather than the manual consolidation entries required to get there?