Capital in excess of par is presented separately and includes any additional paid-in capital pending authorization. Upon raising additional capital, the corporation must restate its assets and liabilities to current fair market values, issuing a special balance sheet, capitalizing any restatement adjustments along with appropriated free reserves and any capital reserves, including share premiums. Stock dividends are accounted for by transferring from retained earnings to permanent capital accounts an amount equal to the nominal value of the additional shares issued. Stock splits and treasury stock are infrequent. However, a system of full restatement, measuring the overall effects of inflation, is encouraged by the Institute of Accountants as well as the application of the current replacement-cost basis when technically adequate.
Inventory is accounted for at cost or at market if lower.
Costs include both direct and indirect charges. Permissible methods of determining flow of inventory for both book and tax purposes include the FIFO, LIFO and average-cost methods. Direct cost is allowed for tax purposes in certain justifiable cases, upon request. The basis for revaluation of fixed assets should be disclosed. Accumulated depreciation and depletion are shown and deducted from cost in the balance sheet.