The share capital of Movers Ltd consists of 500 000 ordinary shares issued at R2 each. On 25 June 20.20 the directors declared a dividend of 10 cents per share for the year ended 30 June 20.20. The dividends as well as the dividend tax were paid on 10 July 20.20. The dividend transaction has not been recorded yet in the draft financial statements of Movers Ltd for the year ended 30 June 20.20.

REQUIRED:

Discuss, with reasons, if the dividends declared to the shareholders in information above should be treated as a liability in the financial statements of Movers Ltd at 30 June 20.20, according to the requirements of the Conceptual Framework for Financial Reporting 2018. You only need to discuss the dividends according to the definition of a liability and not the recognition criteria.

Your discussion must include:

1. Applying the definition to the potential liability.

2. Conclusion