Bulletin HASKINS & SELLS 61
Appropriated Surplus
A QUESTIONNAIRE issued by the
American Institute Committee on
Definition of Earned Surplus has excited a
considerable amount of interest, and been
the means of developing much interesting
discussion.
One question, relating to surplus appropriated
for the retirement of preferred stock,
not only has aroused argument in its own
behalf, but has revived a controversy of
long standing concerning the analogy of
sinking funds "created out of profits."
"Should surplus appropriated for the
retirement of preferred stock under the provisions
of a preferred stock agreement be
considered as permanently appropriated
until the entire issue of preferred stock has
been retired?" Such is the question of the
Institute Committee.
The analogous question for which the
committee is not responsible is as follows:
"Is it necessary, in case an indenture
provides that a sinking fund shall be
created out of profits, to transfer out of
earned surplus into a reserve, an amount
equal to the sinking fund deposit, and if so,
how long should the reserve be kept
standing?"
