OFFICE OF THE ATTORNEY GENERAL OF TEXAS 

AUSTIN 

*_: GROVER SELLERS 

ATIORNEI Gs?al?AL 

Ymfarhbie Ernest Cuba 

county nttorn6y, Ll Paw county 

Yl Yaw, Texan 

Opiaioa sao. o-bebo 

lie: AMe88wnt of 8har68 

of ,acrtloarl bank abook. 

l uoh ohwe am requfred to br 

b y the 8hareholdere l t tlmlr * 

,and toll falne.* 

net 6apitfAl 6Q86t8 to WZ'iV6 at th6 V&b8 beok Of tb Ihbal-08." 

WQ alated in 6 Tex. Jur. 340: 

*It fk proper for tbw awewor or the board 

to eoaeider a11 eAeaumt8 whlab trnd to aompow or 

8UgWnt'ti~ VkiUS Of th0 ItOOk in the h~t1ia8 Or the 

lndlvldual rtookbolder, that is to ray, t&s capital. 

QUX-&Q, tmdiilded pWrlf8 and 611 other perlonal 

and mm1 property owned by the bank as a eorporation.'t 
gonorable Arnest Culnn, page 2 

It ie ins oonneotion with thir method that your problem 

aris88r The inatitutlon in question has included nn item o? 

$265.376.23 as "Other Liabilitiesv in Its "'Report of Conditions 

at the Close or Buelnew on Lhmember 30, 19U.w In another 

stateursnt of oonditlon mailed to It8 depositors however, this 

item 18 inoluded within an aggregate figure of 4629,827.92, which 

is entitled, "Heservetv: Interest, Taxes, Contingenoies end Cther 

Liabilitie8.v The asse8sor is oontending that SuOh fund8 being 

vBe8ervea* are Oapltal fUnd8 in the hand8 ~0r the bank nnd should 

Ohwdore be oonsidered as auginenting the value of' the stook, The 

other oontentlon pursued by the bank 18 that the (225,976.2S portion Of tha #629,827.92 8hould not be treated a8 oapital fUnd8, 

but a8 aliabilitfe8* for the rearon that the )265,376.23 Item 

ie made up 0r "renerve8m ror paynbsnt 0r 8peOisl 80000ntsi nsmely, 

to pay intere8t on saving8 aooount8, oltr taxer, payroll ~texer, 

lntere8t on Oertirioater of depoalt, Federal Depooslt Inmranoe 

Company aa8essments, surety bonds, and old age a88i8tanoe taxem; 

and thut eaoh month there la plaoed in these aaoounts an amount 

that ha8 aoorued in there different iem8. 

Your problem then lnvolveo the proper interpretation of 

a ballking in8titUtiOn's rin6n0isl 8tetement as on aid in erriring 

nt then ttue value 0r it8 ahares. Neither will the Court8 disturb 

sn n88008ment fairly arrived at wr say this drpartment assume 

the role or sn interpreter 0r rlaanoial statirtio8. Value or 

looal bank etook, lika Value oi real estate, I8 arrived at by 

eoneideratioa of raots more eu8geptible of determination by loos1 

experta, those iamlliar with the Looal ploture and oapable of giving proper weight to all availabl*, evidenae. The Legislature ha8 

thus vested sole discretion in Q:~~luation and equalization of values 

of property aubjeat to taxation in the local aasetwaor and board of 

equelieation~. ~hie department is justiried in offering advioe, 

however, where the railure to ooasider a given faot or the improper 

consideration given a raot may amount to arbitrary action or the 

abuse or dlsoretlon. 

ue therefore advise you thnt reaognleed aooounting praatloe 

distinguishes surplus reserves suoh ae for additions, antioip:jted 

losses, bond sinking fmds, and the like from w-oalled “reserves” 

set up for contra asset aooounte, euah as accrued liabilities. 

while aaorued liability “reSerVe0” repreaent runds held by the 

bank not immediately payable, by their very nature as accrued 

t 
liabilities or debts, little, if any, oonsideration oould be aooorded 

euoh runas am elements tending to oompose or augment the value 0r 

th, stook in tiie/ h,mds ot the stoakholder. , hw0~8, ir the 

raats are found 'to 'be am stated by the bank, the assessor and county 

oom;nieslonerel courts should give appropriate ooneideration to the 

raot that the $283.376.23 portion of the so-called "reserve' fund 

represents definite accrued liabll1ties rather than capital funda, 

eurplue or undivided prorita. The assessor or the board of epualizetion may, of oourse, In ereroising their expert administrative Judgment, oonalude that 813 amount la escee8 0r that neoessary to meet 

these liabilitiaa haa been eet aside. Any 8uoh exoese should, of 

oourse, be treated am eurplu8 or undivided prOrit8. 

It le beliaved that the rationalization suggested in 

thi8 opinion will serve to distinguish it ito3 o-pinion Ho~~tJ072 

to which you Invited the attcmntlon or this departnmnt,. 

opinion lnvo3ved a fund set up ror oontingencle8 r#brrr than 

eoorued llabilitiee and the holding wa8 that such fund ~618 

‘one of the feotors to be taken into ooneideration bl the 

board of eQuell%atlon in fixing the value of the stook inr tax 

purpoOee.w 

The principles met forth in thi8 opinion should answer 

the supplemental question presented in the fifth paragraph of 

your letter of September 28th. In the event they do not, however, kindly met rorth tts r80t8 upon whioh~~#&!hi&&tlon i8 

based, a8 you have done the main question pzerrenS+d, and thi8 

opinion will be eupplemsnted aooordingly. 

Yours very truly