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Stockholders' Equity


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Financial Statements Overview

 
Stockholders' Equity
 
Contributed Capital
 
Contributed capital includes the amounts that are transferred from stockholders to the company.
 
   Preferred stock (par value x number of preferred shares issued)
   Common stock (par value x number of common shares issued)
   Additional paid in capital, preferred stock ( [issue price - par value] x number of preferred shares issued )
   Additional paid in capital, common stock ( [issue price - par value] x number of common shares issued )
   Additional paid in capital is also called as "Paid-in capital in excess of par value".
 
 
Retained Earnings
 
Retained earnings represent the amount of the company's past net income retained inside the company (not paid as dividend to stockholders.)
 
   Retained earnings
   Accumulated deficit (if the amount of retained earnings is negative, it is called as "accumulated deficit".)
 
 
Treasury Stock
 
Treasury stock represents the company's common or preferred stock currently owned by the company it self, as a result of stock repurchase in the past.
 
The amount of treasury stock is subtracted from stockholders' equity.
 
   Treasury stock (the amount of treasury stock is determined by either cost method or par value method.)


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Shareholders' Equity

 
 
SFAS No. 129
 
Statement of Financial Accounting Standards (SFAS) No. 129
        a.  Disclosure of Information about Capital Structure
        b.  Issued in February 1997

SFAS No. 129
           --> Consolidates capital structure related disclosures
                 required by
APB Opinion No. 10, 15 and SFAS No. 47.


 Required Disclosures about Securities
           a.  Dividend and liquidation preferences
           b.  Participation rights
           c.  Call prices and dates
           d.  Conversion rates and dates
           e.  Exercise prices and dates
           f.   Sinking-fund requirements
           g.  Unusual voting rights
           h.  Contracts to issue additional shares
           i.   Number of shares issued on conversion or exercise
           j.   Changes in the number of shares of stock
           k.  Liquidation preference for preferred stock
           l.   Amounts at which preferred stock may be called
           m. Amounts at which preferred stock is subject to redemption
           n.  Amounts of arrearages in cumulative preferred dividends
           o.  Amount of redemption requirements for redeemable stock
          
 Preferred Stock
           --> A security with preferential rights (compared to common stock)

 Participation Rights
           --> Rights to receive dividends or returns


APB Opinion No. 12

 Disclosures of Changes in Capital Accounts
           a.  Changes in the accounts comprising stockholders' equity
           b.  Changes in the number of shares of stock


ARB No. 43, Chapter 1A

 Stock Issued for Property
           --> It is not permissible to treat
                 the par value of stock issued
                 as the cost of property acquired.


APB Opinion No. 14

Debt with stock detachable purchase warrants
           --> Proceeds are allocated to the two components.
                 a.  debt security
                 b.  warrants

Allocation is based on
           --> a.  fair value of debt securities without warrants
                 b.  fair value of warrants

Portion of proceeds allocated to debt security
           --> recorded as liability.

Portion of proceeds allocated to warrants
           --> recorded as additional paid-in capital.


APB Opinion No. 29
         
 Cost of an asset acquired 
             = Fair value of the asset surrendered 
                + Cash (boot) paid
                -  Cash (boot) received

 Dividend-in-kind
           --> recorded at the fair value of the asset transferred
           --> gain or loss is recognized on the disposition of the asset.


ARB No. 43, Chapter 7B

 Stock Dividend
           --> Issuance of its own stock to shareholders
                 without consideration
           --> to distribute retained earnings to shareholders.

 Accounting for Stock Dividend
           --> Retained earnings is transferred
                 to capital stock and additional paid-in capital
           --> for the amount of
                 fair value of additional shares issued
                
 Stock Split
           --> Issuance of its own stock to shareholders
                 without consideration
           --> to reduce per share price
                 by increasing number of outstanding shares.

 Accounting for Stock Split
           --> Retained earnings is not transferred to capital stock.

 Issuance of additional shares of more than 25 percent
           --> Recorded as stock splits.


APB Opinion No. 6

 Treasury Stock
           --> Capital stock acquired (and held)
                 by the entity that issued such stock.

 Treasury stock is
           --> reported separately
                 as a deduction from the total of
                       (capital stock, additional paid-in capital, and retained earnings.)

 Gains on Sales of Treasury stock
           --> credited to additional paid-in capital.

 Losses on Sales of Treasury stock
           --> charged to additional paid-in capital
                       (up to previous gains on sales of same class of stock)
           --> remaining losses are
                 charged to retained earnings.
                
 Retirement of Treasury Stock
           An excess of purchase price over par (or stated) value
           --> charged to
                      additional paid-in capital (limited to pro rata portion)
                      and retained earnings.

           Alternatively,
           --> may be charged (entirely)
                 to retained earnings.









 
U.S. GAAP Codification
International Financial Reporting Standards (IFRS)
 
Accounting Topics
Inventory Valuation Methods
Depreciation Methods
Revenue Recognition Principle
Accrual Basis vs. Cash Basis Accounting
Basics of Journal Entries
Ratios for Financial Statement Analysis
Overview of Financial Statements

 








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