Similar to cash dividend payments stock dividends

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- -in capital ($3,750,000). Similar to cash dividend payments, stock dividends, whether large mall, never impact income. ext, assume that instead, BearingPoint declares a large stock dividend of 70% of the I mil- outstanding common ($5 par) shares when the market price of the stock is $30 per share. This ge stock dividend is treated like a stock split and has the following financial statement effects: Cash Asset ses Net Income + + .~ enues :Jistribute ) JO,OOO +$3,500,000-$3,500,000 I :;nares as a Common Retained \ .age stock Stock Earnings _.~~~~ . 5L . nsaction e company's retained earnings declines by $3,500,000, which equals the par value of the large k dividend (700,000 shares x $5 par value per share). Common stock is increased by the par ue of $3,500,000. There is no effect on additional paid-in capital since large stock dividends zrereported at par value. For both large and small stock dividends, companies are required to show comparable shares tanding for all prior periods for which earnings per share (EPS) is reported in the statements. The reasoning is that a stock dividend has no effect on the ownership percentage of each common kholder. As such, to show a dilution in reported EPS would erroneously suggest a decline in fitability when it is simply due to an increase in shares outstanding. ock Splits tack split is a proportionate distribution of shares and, as such, is similar in substance to a large ock dividend. A typical stock split is 2-for-l, which means that the company distributes one RE 45 mil. CS 0,75 mil. APIC 3.75 mil. RE 4.5mil. I CS IO.75mi!. APIC 13.75 mil. RE 3.5 mil. cs 3.5 mil. RE 3.5mi!. I cs I 3.5mi!.
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8-19 Module 8 I Equity Recognition and Owner Financing I IFRS Alert IFRS does not use the term "other comprehensive income" but reports that account in a statement of recognized income and expenses (SoRIE). As with GAAP's other comprehensive income, SoRIE includes all changes to equity, other than transactions with owners. additional share for each share owned by a shareholder. Following the distribution, each inves owns twice as many shares, so that their percentage ownership in the company is unchanged. A stock split is not a monetary transaction and, as such, there are no financial stateme effects. However, companies must disclose the new number of shares outstanding for all periods presented in the financial statements. Further, many states require that the par value of shares be proportionately adjusted as well (for example, halved for a 2-for-l split). If state law requires that par value not be reduced for a stock dividend, this event should described as a stock split affected in theform of a dividend. The following disclosure from Jo Deere's 2007 annual report provides such an example: Stock Split in Form of Dividend On November 14, 2007, a special meeting of stockholders was held authorizing a two-tor-one stock split effected in the form of a 100 percent stock dividend to hold- ers of record on November 26,2007, distributed on December 3,2007. All share and per share data (except par value) have been adjusted to reflect the effect of the stock split for all periods presented.
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