For a less than 20% equity investment, how are cash dividends treated in accounting?

For a less than 20% equity investment, cash dividends are treated as dividend revenue. This treatment reflects the accounting principle that when a company receives dividends from an investment in another company, it recognizes those dividends as income. Since the investment does not give the investor significant influence over the investee (as is the case with less than 20%), the investor does not record the investment using the equity method. Instead, dividends received are recognized directly as revenue in the income statement, which positively impacts the investing company's earnings. This allows the investor to reflect the return on investment in the financial statements, indicating a positive cash flow from that investment.