The Accounting Review Vol. 35 No. 2 1960
ACCOUNTING PRINCIPLES AND CORPORATION STATUTES.
Abstract
Each of the eleven new statutes uses the terms "stated capital" and "earned surplus"; ten use the term "capital surplus" but the District of Columbia statute uses "paid-in surplus." Nine of the new statutes prohibit the sale of par value shares for less than par. Virginia and Maryland permit sale at less than par but without any contingent "discount liability." Although none of the eleven statutes requires a minimum consideration for no par value shares, ten statutes permit only that consideration received for no par value shares in excess of liquidation preferences be designated as capital surplus and six of these have an additional limitation that not more than 25 per cent of the consideration for no par value shares may be designated as capital surplus. One, the North Carolina statute, does not refer to liquidation preferences in connection with designations of capital surplus. Four statutes have not adopted the 25 per cent rule and Virginia has made it optional. All the statutes permit cash dividends on any class of stock to be declared "out of" earned surplus. All the statutes permit cash dividends on preferred stock to be declared "out of" capital surplus, some of these only under certain conditions, e.g., in the absence of earned surplus (six statutes). Four statutes permit cash dividends on common stock to be declared "out of" capital surplus, but two of these have conditions attached to the privilege. Only the North Carolina statute permits dividends to be declared "out of" current earnings in the absence of earned surplus. Each of the new statutes permits stock dividends to be declared "out of" either earned or capital surplus; two statutes permit stock dividends "out of" unrealized appreciation; nine statutes permit treasury shares to be issued as stock dividends although one of these, North Carolina, does not permit them to be called stock dividends. Nine of the statutes have provisions permitting the transfer of earned surplus to capital surplus.
- DOI
- 10.2308/tar-7129990
- Volume
- 35
- Issue
- 2
- Pages
- 246-257
- Language
- en
- Sources
- openalex crossref