It is a commonly held misconception that dividends are paid out of the profits of a particular accounting period and that those paid during the period are known as ‘interim’ dividends, with a ‘final’ dividend being declared after the end of the period, when final profits have been established.

This is not correct: dividends are distributions of retained profits and may be made at any time, subject to the assessment of the availability of distributable profits.

Under UK and international accounting standards, a dividend should only be recognised in the accounts when it is ‘appropriately authorised and no longer at the discretion of the entity’.

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