Distribution of non-cash assets to owners

Question 1

What are examples of non cash assets distributed back to owners?

Answer 1

Distribution of assets other than cash includes dividends to it owners. These owners must be acting in their capacity as owners.

This non-reciprocal distribution of non-cash assets include inventory and PPE.

Owner is defined as holder of instruments classified as equity.

Question 2

How do we apply the SFRS(I)?

Answer 2

All owners of the same class of equity instruments must be treated equally.

The standard does not apply distribution of non-cash asset that is ultimately controlled by the same party or parties before and after distribution. Meaning, the person controlling the asset cannot distribute the asset to themselves.

‘Control’ refers to having the power to govern the financial and operating policies so as to obtain benefits from its activities.

Question 3

What is the nature of distribution?

Answer 3

When an entity declares a distribution and has an obligation to distribute the assets to its owners, this is treated as a dividend.

• All dividends are paid out of retained earnings.
• Once the asset is appropriately authorized and no longer at the discretion of the entity, the entity shall recognize dividends payable as a liability. This falls on the date of:
• Declaration date if shareholder approval is not required
• Shareholder approval date is such approval is required.

Question 4

Initial and Subsequent Measurement of dividends paid.

Answer 4

Initial measurement on the date of shareholder approval:
- The fair value of the non-cash asset.

At the end of each reporting period:
- Adjust the CA of the dividends payable to the fair value of the non-cash asset as at the period end date.

At the settlement date:

• Adjust the CA of the dividends payable to the fair value of the non-cash asset as at the settlement date.
• After adjustment, the entity shall recognize the difference between the CA of the assets distributed and the CA of dividends payable in P/L.

Question 5

What information needs to be disclosed in the notes to the financial statements?

Answer 5

1. Carrying amount of the dividend payable at the beginning and end of the period.
2. Increase or decrease in carrying amount recognized in the period as a result of a change in the fair value of assets to be distributed.