Difference Between Final Dividend and Proposed Dividend (With Table)

Both Final and Proposed Dividend is an essential part of a company’s financial year. While the Proposed Dividend is the expected or declared Dividend for a financial year, the final Dividend stands true to its name. At the end of every financial year, the director board of a company proposes both these dividends.

Final Dividend vs Proposed Dividend

The difference between the Final Dividend and Proposed dividend is that the latter one gets proposed for the sanctioning of the final dividend. In simple words, the Proposed dividend is kept forward by the board of directors for the required changes. After the changes, the board moves forward will the final call.

Final Dividend is what its name suggests. It shows the dividend part that is declared at the annual general meeting by the director board of a corporation. Apart from this, it differs from interim dividend by a lot. The final dividend is usually greater in comparison to the interim dividend.

The proposed dividend is the expected part of a dividend at the end of the financial year. It is given to the shareholders during the current fiscal year but given in the following financial year. Also, it affects the working capital by a good margin in the decreasing year and counts as the current liability.

Comparison Table Between Final Dividend and Proposed Dividend

Parameters of ComparisonFinal DividendProposed Dividend
TerminologyIt shows the dividend part that is declared at the annual general meeting by the director board.It is the expected part of the dividend that is proposed by the board of directors.
LiabilityIt is not considered a current liability.Proposed dividend affects the working capital by a good margin in the decreasing year and is counted as a current liability.
Disbursed inIt is disbursed in the current year.It is declared in the current year but given at the following year to the shareholders.
Mutual RelationshipIt is the final result of the proposed dividend.Proposed dividend refers to the final dividend at last.
Proposal and DeclarationAt first, the final dividend is proposed by the board of directors and then declared by the shareholders.It must be less than the recommendation of the board of directors.

What is Final Dividend?

The final Dividend is disclosed to the shareholders during the meeting of the director board of a company. The payment in terms of a final dividend is done in cash and not in stocks to the shareholders. It stays at a fixed amount for a specific stock.

Final Dividend is what its name suggests. It shows the dividend part that is declared at the annual general meeting by the director board of a corporation. Apart from this, it differs from interim dividend by a lot. The final dividend is usually greater in comparison to the interim dividend.

It is usually used in Europe and United States. Declared at the annual general meeting, it is called the successor of the proposed dividend. It can also be paid periodically(after every quarter). As soon as the earnings of a company are known for a financial year, the board of directors releases the final dividend. Generally, it is determined by the director board of a company but claimed by the shareholders annually.

What is Proposed Dividend?

The proposed dividend is the expected part of a dividend at the end of the financial year. It is determined to the shareholders during the current fiscal year but given in the following financial year. Also, it affects the working capital by a good margin in the decreasing year and counts as the current liability.

With the new amendments coming in place, the proposed dividend won’t be included in the balance sheet. Rather it will be displayed in the adjustment only. It is usually counted as a current liability because it affects the working capital in decreasing order.

Proposed in the current financial year but paid in the next year, the proposed dividend is taxable and when it is kept forward by the board of directors. There are many accounting software that helps people to create a sheet for the proposed dividend in a hassle-free manner. All it asks for is the date and reference related to the transaction, with some other credentials. It can be downloaded for offline purposes and meetings or can be used through cloud-based software.

Main Differences Between Final Dividend and Proposed Dividend

  1. The final dividend is the annually declared dividend by the board of directors, whereas the proposed dividend is the expected part of the dividend.
  2. The final dividend is not considered as a current liability. But, the proposed dividend is counted as a current liability.
  3. The final dividend is disbursed in the current year. On the other hand, the proposed dividend is declared in the current year but given in the following year to the shareholders.
  4. The final dividend is the annual result of the proposed dividend, whereas the Proposed dividend refers to the final dividend at last.
  5. At first, the final dividend is proposed by the board of directors and then declared by the shareholders. The proposed dividend must be less than the recommendation of the board of directors.

Conclusion 

Although the proposed dividend refers to the final one, they both are still very different. The final dividend shows the dividend part that is declared at the annual general meeting by the director board of a corporation. On the other hand, the proposed dividend is the expected part of a dividend at the end of the financial year. It is determined to the shareholders during the current fiscal year but given in the following financial year. 

Both these dividends have a lot in different. The proposed dividend is also chargeable in terms of tax and is now displayed on the adjustment, not on the balance sheet. The term, Final dividend is usually used in Europe and United States and can be paid quarterly or every year. 

References

  1. https://heinonline.org/HOL/LandingPage?handle=hein.journals/intaxr14&div=75&id=&page=
  2. https://www.sciencedirect.com/science/article/abs/pii/S0929119912000892
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