Issued by the Committee on Accounting Procedure, American Institute of Accountants, 270 Madison Avenue, New York 16, N. Y.
Copyright 1952 by American Institute of Accountants
November, 1952 No. 11
Accounting for Stock Dividends and Stock Split-Ups
This bulletin supersedes Accounting Re-search Bulletin No. 11, "Corporate Account-ing for Ordinary Stock Dividends " issued in September, 1941.
1. The term stock dividend, as used in this bulletin, refers to an issuance by a corporation of its own common shares to its common shareholders without consideration and under conditions indicating that such action is prompted mainly by a desire to give the recipient shareholders some ostensibly separate evidence of a part of their respective interests in accumulated corporate earnings without dis-tribution of cash or other property which the board of directors deems necessary or desirable to retain in the business.
2. The term stock split-up, as used in this bulletin, refers to an issuance by a corporation of its own common shares to its common shareholders without consideration and under conditions indicating that such action is prompted mainly by a desire to increase the num-ber of outstanding shares for the purpose of effecting a reduction in their unit market price and, thereby, of obtaining wider distribution and improved marketability of the shares.
3. This bulletin is not concerned with the accounting for a dis-tribution or issuance to shareholders of (a) shares of another corpora-tion theretofore held as an investment, or (b) shares of a different class, or (c) rights to subscribe for additional shares, or (d) shares of the same class in cases where each shareholder is given an election to receive cash or shares.
4. The discussion of accounting for stock dividends and split-ups that follows is divided into two parts. The first deals with the prob-lems of the recipient. The second deals with the problems of the issuer.