Consolidated statement of profit or loss and other comprehensive income

Question 1

If parent has dividend income from subsidiary in its SPLOCI, this must be cancelled on consolidation for following reasons:

Answer 1

• It is showing legal form rather than substance, so dividend income is replaced by adding across the subsidiary’s results line by line.
• Aim is to show group as a single entity. Therefore intra-group transactions must be cancelled. Dividends paid are reported as a deduction to retained earnings in SOCIE. Therefore dividend income in parent’s SPOLCI is cancelled with deduction in retained earnings in subsidiary’s SOCIE.