California Code of Regulations › Title 10 - Investment › Chapter 2 - Savings and Loan Commissioner › Subchapter 3 - Applications and Hearings › Article 4 - Guarantee Stock › Section 103.401 - Stock Dividends and Stock Split-Ups

Current through Register 2024 Notice Reg. No. 28, July 12, 2024
The term "stock dividend" refers to an issuance by an
					 association of its own guarantee stock to its stockholders without
					 consideration and under conditions indicating that such action is prompted
					 mainly by a desire to give the recipient stockholders some ostensibly separate
					 evidence of a part of their respective interests in accumulative earnings
					 without distribution of cash or other property which the board of directors
					 deems necessary or desirable to retain in the business.
The term "Stock Split-Up" refers to an issuance by an
					 association of its own guarantee stock to its stockholders without
					 consideration and under conditions indicating that such action is prompted
					 mainly by a desire to increase the number of outstanding shares for the purpose
					 of effecting a reduction in their unit market price and, thereby, obtaining
					 wider distribution and improved marketability of the shares.
The accounting for stock split-ups presents no significant
					 problems as no accounting entries are generally required. The accounting for
					 stock dividends, however, requires adjustments to the capital stock and capital
					 surplus accounts to reflect the market value of the stock dividend.
Generally accepted accounting principles require that the
					 fair value of the shares issued be capitalized and charged to retained
					 earnings; however, no distinction is made between appropriated or
					 unappropriated retained earnings. Either unappropriated and/or appropriated
					 retained earnings may be capitalized as capital surplus for the purpose of
					 recording a stock dividend, thus satisfying the requirements of generally
					 accepted accounting principles.
In accounting for stock dividends, the guarantee stock and
					 capital surplus accounts must be increased in an amount equivalent o the fair
					 market value of the stock issued, if determinable, or by some reasonable amount
					 if the fair market value is not easily determined. The guarantee stock account
					 must be increased by the par value of the shares issued and any amount in
					 excess credited to a capital surplus account. The capital surplus account shall
					 be segregated into two segments, that directly contributed by the investors,
					 and that contributed by appropriations from retained earnings or general
					 reserves as stock dividends.
If the transfer to the latter account is from the Federal
					 Insurance Reserve or another general reserve account, this must be disclosed or
					 annotated to preserve its identity.
1. Change
					 without regulatory effect renumbering former Section
					 191 to Section
					 103.401 (Register 87, No. 14). For
					 prior history, see Register 82, No. 19.
Note: Authority cited: Section
						5255,
						Financial Code. Reference: Sections
						6450,
						6456, and
						6457,
						Financial Code.