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The treatment of dividends at consolidation level, paid by a subsidiary, that are identified as paid out of pre-acquisition profits in the period they are

The treatment of dividends at consolidation level, paid by a subsidiary, that are identified as paid out of pre-acquisition profits in the period they are paid, is carried to:

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capitalise the dividend in the books of the parent company as a further investment in the subsidiary. This amount will be eliminated on upon consolidation

record a return on the investment in the subsidiary by reducing the investment in the subsidiary in the books of the parent company. The amount of the investment will be eliminated on consolidation

record a reduction in pre-acquisition reserves or retained earnings in the books of the subsidiary

record dividend revenue and the cash receipt in the books of the parent company

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