Possibilities of identifying distortion of the calculation basis for the payment of dividend on the basis of accounting

Abstract

Financial earning from dividends and profit shares are important income for the owners. From the business corporation perspective is the setting of dividend policy important for keeping the financial stability and solvency of the corporation. The most important indicator of the financial performance of the corporation is the profit reached. Czech accounting rules allow to account some revenue and expenses of on the basis of estimates so that all expenses and revenue are accounted in the period which is related in matter and time. These items are often a means for creative distortion of the economic result with the aim to reach the required level of covenants that lead to payment of benefits, directors rewards and annuals rewards for the management and also for the overvaluating of the economic result as one of the variables for the calculation base for the payment of dividends. Current legislation for setting the calculation base for the payment of dividends is not satisfactory and does not protect against disproportional outflow of financial means in the form of dividends for the owners. The paper concentrates on the possibility of identifying the distortion of the calculation base for the payment of dividends and on the proposal of a modification of the calculation base for the payment of dividends which would respect the legal right of the owners but also protect the financial stability of the business corporation and ensure its growth during its existence and to limit the outflow of money abroad. Key words: calculation base for the payment of dividends, net profit, payment ratio, modified reporting, NTEDP (net total earning for dividend payments), tests of profitability and own capital, accounting.