Concept of Income Equalization

Once you google it, you will get multiple articles on this income equalization factor. But let us understand the concept with a simple example :

A fund gives dividend to the shareholders in every six months.

Last time after the dividend accounting period was over, the share price was $100 (after adjusting the dividend amount from the market price).

 

Now the share price is $112 at the end of current accounting period for the dividend. Hence a dividend of $12  will be paid out per share to all share holders. (112-100)

Now we have two investors Mr A and Mr B.

M

A is holding the shares for the entire current accounting period. Hence his cost price was 100 and now he is receiving an income of $12 per share. This entire amount is treated as income and once the ex date is over, the share price goes back to 100 to adjust the dividends ( assuming all other economic factors constant).

Now let us come to Mr B. He purchased the shares in between previous and current dividend date at $105 per share. He will also receive $12 per share.

But after ex date the share price will fall to 100 for him too. So can we call this entire $12 as income for Mr B ?

Answer is no because in his case, he earned $7 (112-105) as income and $5 as capital adjustment.

This $5 is called the income equalization amount which is treated as capital and not income for tax.

N:B When Mr B sells his share at $130 at a future date, for capital gain calculation, his cost price would come down to $(105-5)=100 as $5 is already received as capital repayment during last dividend payout.

( Hypothetical figures are taken for understanding the concepts only. In reality, we wouldn't have $12 dividend per share for a security trading at $112).

Front ,middle and back office of training

We have heard about market front offices where you get sales and trading floors and then with the support of middle office technologies, the data moves to back office for processing.

Do we have the front , middle, back concept in our training profession ? Have you ever thought about it ?

As per me, for a trainer, the front office is the concepts. Each and every activity that we see in professional field, is based on some concepts. Be it flying an aeroplane, driving a car, cooking food or calculating NAV- You need to understand the concepts to process it.

The workforce that processes it, their brain is our back office. We as a trainer, needs to pass the concepts to their brain.

Then what is our middle office ? The different training methodologies we use as a mode of delivery, the very popular 'digitalization'  are all part of middle office of learning and development.

We are strengthening the middle office of training by introducing digital tools and these are really useful in transferring the concepts to the brains. But we equally need good skillful and knowledgeable trainers who knows the concepts in an out. If your training front office is not strong, and trainers do not understand the domain concepts, a rich technology based middle office also will fail.