Case: Kanchan Holdings Ltd holds shares in an investee company. For the investee's year ended 31 March, its board recommended a dividend on 20 April, which was approved by shareholders on 15 June. Under AS 9 (read with AS 4), dividend income should be recognised in Kanchan Holdings' books:

Correct answer: B) In the next year, when its right to receive payment is established

Explanation

AS 9 requires dividends to be recognised when the owner's right to receive payment is established. That right did not exist at 31 March, so the dividend is recognised in the following year. Time-proportion basis applies to interest, and a cash basis is not appropriate once the right is established and collection is reasonably certain.