Accounting for Stock Dividends & Stock Splits -- Time for a Change

Accounting Research Bulletin (ARB) 43 is the authoritative pronouncement on accounting for stock dividends and stock splits. ARB 43 defines stock dividends and stock splits based on corporate and shareholder perceptions rather than economic substance. ARB 43 also fails to offer specific guidelines...

Full description

Journal Title: The National Public Accountant Vol. 31; no. 3
Authors: Thomas Monahan, Bill N Schwartz
Format: Article
Language: English
Published: March 1986
Subjects:
Summary: Accounting Research Bulletin (ARB) 43 is the authoritative pronouncement on accounting for stock dividends and stock splits. ARB 43 defines stock dividends and stock splits based on corporate and shareholder perceptions rather than economic substance. ARB 43 also fails to offer specific guidelines for the accounting treatment of certain types of stock dividends and stock splits. To determine the usage of generally accepted accounting principles for stock dividends and stock splits, annual reports were examined from 103 Fortune 500 companies with stock distributions greater than 25% in 1984. The survey demonstrated the inadequacy of current pronouncements in adhering to Statements of Financial Accounting Concepts 1 and 2. In the future, all stock distributions should be recognized by increasing the number of shares and decreasing the par value. Also, any artificial distinction between stock dividends and stock splits should be eliminated.
ISSN: 0027-9978