Retained earnings and Book value per share

1. Property dividends is distribution of noncash assets or shares of another entity to owners

2. Entity shall measure a noncurrent asset classified for distribution at the lower of carrying
amount and fair value less cost to distribute. If fair value is lower, there is impairment
loss.
3. In closely held entities, if stock dividends are declared, retained earnings shall be
capitalized only to the extent of par value or stated value of the shares.
4. Wasting asset doctrine states that entity can declare dividends not only to the extent of
the retained earnings balance but also to the extent of the accumulated depreciation
balance
Retained earnings 3,000,000
Capital liquidated-acc. Depletion 2,000,000
Dividends payable 5,000,000
5. Distribution to holders of an equity instrument classified as financial liability are
recognized in the same way as interest expense on a bond. Dividends paid to holders of
mandatorily redeemable preference share shall be accounted for as interest expense as
component of finance cost
6. Appropriation may be legal, contractual, or voluntary.
7. Quasi-reorganization is a permissive but not a mandatory procedure under which a
financially troubled entity restates its accounts and establishes a fresh start in accounting
sense. It is called corporate readjustment. It may be accomplished through
recapitalization or revaluation of PPE.
(PPE’s fair value is 6,000,000)
Accumulated dep 1,000,000
RE 500,000
PPe 1,500,000

Revaluation:
PPE 4,000,000
Acc. Dep 1,200,000
Revaluation surplus 2,800,000

Cost Replacement cost

PPE 5,000,000 9,000,000 4,000,000
Acc. Dep(30%) (1,500,000) 2,700,000 1,200,000
3,500,000 6,300,000 2,800,000
8. The result of revaluation of PPE must be made by an independent expert or specialist
9. The resulting deficit from the reorganization is offset against the revaluation surplus
10. Retained earnings subsequent to the quasi-reorg shall be restricted to the extent of the
deficit wiped out during the reorganization and therefore cannot be declared as a dividend
11. The quasi-reorg shall be disclosed for at least 3 years—date, mechanics, purpose and
effect of quasi-reorg on the entity’s statement
12. Quasi-reorganization must be approved by SEC.
 13. When preference as to assets, the preference shareholders are entitled to payment not
only for the liquidation value but also for dividends in arrears.
14. Dividends in arrears usually include current dividends
15. In case where there are two classes of preference share with different dividend rates and
both are participating, the lower rate shall be the basis for allocation to the ordinary share.
16. Participating up to 16% means that the preference share shall receive for the current year
a maximum of 16 percent on the par value. Since the preference share already receives 12% as
basic dividend for the current year, then it participates only to the extent of 4% on the par of
2,500,000 or 100,000.
17. When dividends has preference as to assets, it shall be given dividends even when there is
a deficit. Total deficit is charged to Ordinary shareholders.
18. Preference as to dividends means that preference holders will receive first dividends if and
when dividends are declared. No dividends can be declared when there is deficit. Preference and
ordinary share on the deficit on a pro rata basis.
19. Subscribed shares are entitled to dividends.
Issued 2,500,000
Subscribed 1,000,000
Total 3,500,000
Treasury at par (500,000)
Outstanding 3,000,000
 treasury shares are treated as retired for book value purposes.
1. Preference share capital 500T
Treasury 400T
SP 100T
20. Subscription receivable is not deducted for book value purposes.

Earnings per share:

1. EPS pertains only to ordinary shareholders.
2. 2 computations of earnings per share is covered by PAS 33 which requires two
presentations of earnings per share: basic earnings per share and diluted
3. Public entities are required to present earnings per share
4. An entity shall present basic and diluted earnings per share on the face of income
statement with equal prominence for all periods presented
5. When an entity presents both consolidated and separate, disclosures required by the
standard need be presented only on the basis of the consolidated info.
6. An entity that chooses to disclose earnings per share on its separate financial statements
shall present such earnings per share info on the face of its separate income statement. An
entity shall not present such earnings per share on the consolidated financial statements.
7. Net income is equal to the amount after deducting dividends on preference share
8. If the preference share is cumulative, preference dividend for the current year only is
deducted from the net income whether such dividend is declared or not. If the preference
share is noncumulative, preference dividend for the current year is deducted from net
income only if there is declaration
9. If there is a significant change in the ordinary share capital during the year, weighted
average no. of ordinary shares outstanding during the period should be used.
10. Where stock dividends or share splits create a change in the capital structure, the increase
and decrease in the number of shares shall be recognized retroactively, meaning the stock
dividends or split shall be treated as a change from the date the original shares were
issued.