Date of declaration

Definition

The date of declaration is the date on which a company's board of directors formally announces a dividend. This marks the point at which the company incurs a liability for the dividend payment.

5 Must Know Facts For Your Next Test

1. On the date of declaration, a journal entry is made to record the dividend liability.
2. The declaration creates an obligation for the company to pay a specified amount to shareholders.
3. Stock prices may react upon announcement due to changes in perceived value.
4. It precedes both the date of record and the payment date in the dividend process.
5. The declaration must be approved by the board of directors.

Review Questions

Related terms

Date of Record: The cutoff date established by a company to determine which shareholders are eligible to receive dividends.

Date of Payment: The day when the company actually distributes dividends to its shareholders.

Retained Earnings:

The accumulated portion of net income that is retained by the company rather than distributed as dividends.