Book review: Capital stock without par value, by John R. Wildman and Weldon Powell;

              86 HASKINS & SELLS November
Book Review
Capital Stock Without Par Value*
By JOHN R. WILDMAN and WELDON POWELL
Reviewed by P. L. Wilton
AGLANCE at the financial section of
any daily newspaper will show one
that many advertisements for new offerings
of stocks are for capital stocks without par
value. Of recent issues appearing, out of
125 advertisements, 90% of the common
stock was without par value and 35%
of the preferred stock was without par
value. Many established corporations are
changing to a no-par basis.
This change has been so rapid that com­paratively
little has been written on the
subject of capital stock without par value,
and there has been much misunder­standing
of the real nature of such stock.
Capital Stock Without Par Value should
help greatly to clear up misunderstandings.
It covers the subject in a concise, compre­hensive
manner, and the complete story of
no-par shares is interestingly told with a
wealth of detail.
The advantages and disadvantages of
capital stock without par value are con­vincingly
presented. When used ration­ally
and in accordance with sound economic
principles, no-par stock generally has ad­vantages
which outweigh those of capital
stock with a par value. A distinct advan­tage
is that working capital can be ob­tained
without inflating the book value of
assets. There is no occasion for placing
assets on the books at a figure equal to the
par value of stocks issued, as is often done
with par value stock. No-par shares are
flexible, adaptable to the market and to
the purchasing class. They dispense with
the necessity of having to account for dis­count
and other deferred charges in con­nection
with the issue of par stock, since
such expenses can be deducted from the
proceeds, the net proceeds being capital­ized.
It is not to be thought that no-par
shares are without any disadvantages.
One in particular is that they may be used
to conceal deficits from operations, since
this is possible under some statutes.
The book should be of help to account­ants
in advising clients, to bankers and
business men in corporate financing, mer­gers,
and reorganizations, and to investors
in judging security offerings, inasmuch as
all must frequently understand the prin­ciples
relating to no-par stock. The
legal, accounting, and economic aspects of
the subject are fully presented.
After discussing the significance and his­torical
background of capital stock without
par value, the authors describe specifically
the points to be considered in originally
issuing no-par stock, determining capital
value, acquiring own stock and the relation
of such stock to surplus, the effect on sur­plus
of changing the form of shares, and
the use of no-par stock in flotations; to
mention but a few of the topics.
The accounting treatment is fully out­lined.
In general, the principles are the
same as in accounting for par value shares,
and in connection with this discussion com­parison
is made between accounting for
no-par and par value stock. The account­ing
procedure must, of course, take cog­nizance
of the statute provisions on no-par
stock. Excellent illustrations are used
and many court decisions are introduced
to aid in explanation.
The next to the last chapter reviews the
principal provisions of the various state
laws relating to capital stock without par
value. Wisconsin has an admirable no-par
stock law. It adheres to the sound and
conservative economic principles governing
*A. W. Shaw Company, Chicago, 1928.