Short-term Provisions
Like long-term provisions, short-term provisions are also required to be categorised in the notes into two categories :
(i) provisions for employee benefits, and (ii) others (specifying nature). It includes provision for dividend, provision for taxation warranty provision.
There is no specific requirement to show 'proposed dividends' under 'provisions'. Instead, it is required that the amount of dividends proposed to be distributed to equity and preference shareholders for the period and the related amount per share shall be disclosed separately.
One possible interpretation can be that since proposed dividend is considered as not representing a present obligation on the balance sheet, it no longer need/can be provided for. However, it needs to be noted that as per AS 4, Contingencies and Events Occurring After the Balance Sheet Date :
'14. Dividends stated to be in respect of the period covered by the financial statements, which are proposed or declared by the enterprise after the balance sheet date but before approval of the financial statements, should be adjusted.'
Thus, even in the absence of any specific requirement in the revised Schedule, dividends will have to be recognised as per the requirements of AS 4.
It may also be mentioned that with regard to arrears of fixed cumulative dividends, the existing Schedule VI requires a company to disclose the amount of arrears for each class of preference shares before deduction of income tax (except in the case of tax free dividends) and period of arrears. In case such dividend is tax free then the fact needs to be stated.
The revised Schedule requires disclosure of only arrear of fixed cumulative dividends i.e. the period of arrear and tax position need not be stated.
