SHE Flashcards
Components of Equity
TROT
Total Contributed Capital
Retained Earnings
Other Comprehensive Income
Treasury Shares
Contributed Capital
What are included?
Share Capital - at par
Subscribed SC - at par
Share Premium - excess over par
- Donated Capital
- Share Warrants and Options
- Share Dividend
- Recapitalization
Legal Capital
- with Par Value
- without Par Value
With Par Value = SC + SSC + SP
SP → share dividends only
WIthout Par Value = SC + SSC + SP
SP → share dividends & excess over stated
Contributed Capital vs Legal Capital
- both are SC + SSC + SP
What is the difference?
For Contributed Capital, SP is composed of all transactions
- Donated Capital
- Share Warrants and Options
- Share Dividend
- Recapitalization
Subscription Receivable
General Rule? Exception?
Remember in Subscription Receivable
GR : contra-equity account (deducted)
XPN : if receivable within 12 months
NOTE : There’s Share Premium even if Subscribed only
Measurement for Non Cash / Services
- FV of non cash / service
- FV of share
- Par value
Issuance of Ordinary / Preference For Lump Sum
With FV
Without FV
With FV → Allocate
Without FV → Residual Approach
COSTS INCURRED
- Donation Costs
- Share Issuance Costs
- Public Offering / Listing Costs
What is the treatment for each?
Donation Cost → deducted from SP (not expensed)
Share Issuance Cost → deducted from SP then RE
- Contra-equity account (net of tax)
Public Offering / Listing Cost → expensed
Rights Issue
Other Term and What to do?
pre-emptive right
memo entry only
Redeemable vs Callable
Who is the liability? Who is the equity?
CE
Redeemable (Gain or Loss)
- Redeemable = Liability
- Dividends - interest expense
Callable (Share Premium or Retained Earnings)
- Callable = Equity
- Dividends - retained earnings
Formula for Retained Earnings
RE, Beg
+/- Accounting Policy
+/- Prior Period Errors
=Adjusted RE, Beg
+/- Net Income (Loss)
less Dividends
less Appropriated RE
=Unappropriated RE, End
When do you recognize dividends?
What is the journal entry if you recognize? if you pay dividends?
Who are entitled to dividends?
- @ date of declaration
- Dr. RE // Cr. Dividend Payable
- Dr. Dividend Payable // Cr. Kind of Dividend
- outstanding shares (issued + subscribed - treasury)
How to get amount of cash dividend
- if ordinary share
- if preference share
Ordinary → per share
Preference → outstanding par value
Property Dividend
What is the measurement of the dividend payable?
What is the measurement of the property?
Can there be an impairment loss?
Dividend Payable > Property = Gain or Loss?
Dividend Payable
- Fair Value of Asset (remeasured (1) @ BS date (2) @ distribution date)
Property (lower of)
- Carrying Amount
- FV less CTS
CA vs FV less CTS = Impairment Loss
Gain
Share Dividend
Does the amount of equity change?
How to qualify for large / small share dividend?
How to measure large / small share dividend?
- From RE to Share Capital (ALOE remains the same)
- Large Share Dividend (20% and above) → Par value
- Small Share Dividend (19% and below) → FV at declaration date
Recapitalization - disclosed for 3 years
3 Ways of Recapitalization
1. Par to No par (vice versa)
2. Reduction of par / stated
3. Share split (Up or Down)
Out of the 3, who needs Journal Entry?
1 and 2
- 3 = memo entry only
Share Split (Part of Recapitalization)
Paano yung technique?
2 for 1
- yung word na “for” gawing “/”
- if reverse split, yung 2 ilagay sa pwesto ng 1 and vice-versa
2 Steps in Quasi-Reorganization
- Revalue A & L to FV → reflected to RE
- If still deficit → recapitalize SC → SP → RE
Treasury Shares
- cost method
if resold?
if retired?
some notes
cost method
Resold
- Price > Cost (Share Premium - TS)
- Price < Cost (SP - TS or Retained Earnings)
Retired
- Par > Cost (Share Premium - TS)
- Price < Cost (SP - Orig or SP - TS or Retained Earnings)
Every TS transaction → corresponding entry for appropriation of RE
TS → limit is balance of unappropriated RE (Trust Fund Doctrine)
Technique in Solving SHE
3 Steps
- Prepare SHE table
- Monitor # of shares (Common/Preference)
- Journal entry for some transactions
