Government Finance Statistics Manual 2014

106 Government Finance Statistics Manual 2014

Dividends (1412).

5.111 Dividends (1412) are the distributed earn-

ings allocated to government or public sector units, as

the owners of equity, for placing funds at the disposal

of corporations.^31 Raising equity through the issue of

shares is an alternative way of raising funds compared

to borrowing. Equity does not give rise to a liability

that is fi xed in monetary terms and it does not en-

title the holders to a fi xed or predetermined income.

Instead, the board of directors or other managers of

the corporation must declare a dividend payable on

their own volition. Dividends exclude issues of bonus

shares that simply represent a reclassifi cation between

own funds, reserves, and undistributed profi ts.

5.112 Although dividends represent a part of in-

come that has been generated over a substantial period

of time, oft en 6 or 12 months, dividends are not re-

corded in GFS at the time the economic value is gen-

erated. For public corporations where government or

another public corporation is the only shareholder and

the shares are not publicly traded, the dividends are re-

corded at the time they are payable. Quoted shares go

“ex-dividend,” meaning that the dividend is payable to

the owner at that date. In other words, the owner of the

equity at the ex-dividend date, and not the owner on

the date dividends became payable, has the right to the

dividend. A share sold “ex-dividend” is therefore worth

less than one sold without this constraint. In this case,

the time of recording of dividends is the point at which

the share price starts to be quoted on an “ex-dividend”

basis rather than at a price that includes the dividend.

5.113 General government units may receive divi-

dends from resident or nonresident private or pub-

lic corporations (see Table 5.9). In exceptional cases,

legally constituted corporations that are classifi ed as

a general government unit may also distribute divi-

dends, so that dividends may also be receivable from

other general government units (though subject to

consolidation). Th e sector of the counterparty to

dividends receivable should be identifi ed separately

to allow for consolidation of the general government

and public sectors.

5.114 Distributions of profi ts by public corpora-

tions may take place irregularly and may not be ex-

(^31) Government or public sector units, in their capacity as share-
holders, may in some cases also acquire equity by transferring
nonfi nancial assets to a corporation.
plicitly labeled as dividends. Nevertheless, dividends
include all distributions of profi ts by corporations to
their shareholders or owners, by whatever name they
are called, including profi ts of central banks trans-
ferred to government units, profi ts transferred or
distributed from the operation of monetary authority
functions outside the central bank, and profi ts trans-
ferred by state lotteries that compete with other pri-
vately organized lotteries. Distributions of profi ts of
fi scal monopolies (1143) and profi ts of export or import
monopolies (1153), however, are classifi ed as taxes, as

described in paragraphs 5.63 and 5.86.

5.115 Dividends are notionally paid out of the cur-

rent period’s operating surplus. However, corporations

oft en smooth the payments of dividends, sometimes

paying out rather less than their operating surplus but

sometimes paying out a little more, especially when the

operating surplus itself is very volatile. For practical

reasons, no attempt is made to align dividend payments

with earnings except in one circumstance. Th e excep-

tion occurs when dividends are disproportionately

large relative to the recent level of dividends and earn-

ings. Such disproportionally large and irregular pay-

ments, oft en referred to as “super-dividends,” are oft en

based on accumulated reserves, privatization receipts,

other sales of assets, or holding gains. Any dividends

declared greatly in excess of the recent level of divi-

dends and earnings should be recorded as a transaction

in fi nancial assets, specifi cally the withdrawal of own-

ers’ equity from the corporation (see paragraph 9.49).

5.116 To determine whether “super-dividends”

are disproportionately large, it is helpful to introduce

the concept of distributable income. Distributable

income of a corporation is equal to entrepreneurial

income, plus all current transfers receivable, minus

all current transfers payable, and minus the adjust-

ment for the change in pension entitlements relating

to the pension scheme of that corporation (see also

2008 SNA 7.131). From this it is possible to look at

Table 5.9 Detailed Classifi cation of Dividends

(1412)

1412 Dividends

14121 From nonresidents

14122 From residents^1

(^1) Further breakdown/“of which” lines could allow for the identifi -
cation of subsectors and individual units (see Table 3.1).