Can someone explain why the dividend income for Midland is not included in the income statement by way of reducing Iberia’s investment in the company?
As for any company, the decision to give out Dividends (and its effect) happens below the net income line. it should’nt be included in the calculation of equity income…
Dividends is assumes in B/S
Equity Income is lessened Equity Investment line from the balance sheet, but since you have a return of capital (earnings) via Dividends you must subtract that from Equity Investment line as well.