Good day
We have a company that holds a minority holding in another company. The company meets the definition of an associate and is accounted as such. In the separate financial statements, it is accounted for using the equity method. We prepare consolidated statements at a higher level as well.
However, the dividends received from the investments seems to have reduced the investment to zero. The company has not other investments. The problem now is that due to the fact that the investment is reflected as zero, the company is now technically insolvent and cannot distribute these funds to its holding company.
As this would now appear to be a recurring event, my question is whether we can change the accounting policy to the cost model and record the dividend received as dividend income and the share of profit/loss in the income statement. This would then be consolidated out using consolidated journals at the holding company level?
