Distributed income of corporations (D.42)

Dividends (D.421)

4.53 . Definition:

Dividends (D.421) are a form of property income received by owners of shares (AF.5) to which they become entitled as a result of placing funds at the disposal of corporations. Raising equity capital through the issue of shares is an alternative way of raising funds to borrowing. In contrast to loan capital, however, equity capital does not give rise to a liability that is fixed in monetary terms and it does not entitle the holders of shares of a corporation to a fixed or predetermined income.

4.54 . This heading also includes:

a) shares issued to shareholders in payment of the dividend for the financial year. However, issues of bonus shares which represent the capitalisation of own funds in the form of reserves and undistributed profits and give rise to new shares to shareholders in proportion for their holdings are not included;

b) dividends received by mutual funds (see paragraph 2.51. b) from the investments they have made, and which are assigned to shareholders, even if they are capitalised. It excludes holding gains or losses on financial instruments belonging to unit trusts, which are not recorded as property income;

c) the income paid to general government by public enterprises which are recognised as independent legal entities though not formally constituted as corporate enterprises.

4.55 . Time of recording: Dividends are recorded at the time they are due to be paid as determined by the corporation.

In the system of accounts, dividends appear:

a) among uses in the allocation of primary income account of the sectors in which the corporations are classified;

b) among resources in the allocation of primary income account of the sectors in which shareholders are classified;

c) among uses and resources in the external account of primary incomes and current transfers.