Business, Legal & Accounting Glossary
The declaration date is the date on which a company’s board of directors sets the amount of the next quarterly dividend. Typically it is many weeks in advance of the actual payout date.
The declaration date is one of three key dates associated with company dividends. It is on the declaration date that the firm incurs a legal obligation to pay dividends. For example, on November 1 (the declaration date) the company declares a quarterly dividend of $2 on its 500,000 outstanding shares, to be paid November 30 (the payment date) to shareholders of record on November 15 (the record date). On the declaration date, the company debits retained earnings $1,000,000 and credits dividends payable $1,000,000. On the record date, the obligations incurred on the declaration date have not changed, and no entry is made. On the payment date, the company credits cash for $1,000,000 and debits dividends payable $1,000,000, eliminating the liability incurred on the declaration date. Note that the declaration date is also called the announcement date.
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This glossary post was last updated: 4th August, 2021 | 15 Views.