# ASC 505-20-05: Equity — Stock Dividends and Stock Splits — 05 Overview and Background Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/505/20/#05-overview-and-background) Study and research edition. Verify current requirements with the official source. Summaries, enrichment, and tags are machine-generated study aids. Paragraph html preserves source markup; snippet is abbreviated. Pending content is not necessarily effective. Tables and mathematical or amendment markup are retained as HTML where Markdown would lose structure. Source downloaded (UTC): 2026-09-10T00:37:32.565Z to 2026-09-10T00:37:32.565Z Record version: sha256:6caa936ac61cc94aec93504198e27c81f357c50474e8afef4b69f442accd03c2 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 505-20-05: 05 Overview and Background [Read section](https://asc.understandingaccounting.org/asc/505/20/#05-overview-and-background) SEC content: no ##### [505-20-05-1](https://asc.understandingaccounting.org/asc/505/20/#505-20-05-1) Pending content: no Source downloaded (UTC): 2026-09-10T00:37:32.565Z to 2026-09-10T00:37:32.565Z Record version: sha256:4a1d790f20ad8e0c5dbdb18f0e5ebc078faa93127c41af21a885ba1345da49a4 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic addresses the accounting for stock dividends and stock splits. It includes guidance for the recipient as well as for the issuer. ##### [505-20-05-2](https://asc.understandingaccounting.org/asc/505/20/#505-20-05-2) Pending content: no Source downloaded (UTC): 2026-09-10T00:37:32.565Z to 2026-09-10T00:37:32.565Z Record version: sha256:dda3bd49c80b023a5ce27f3435460cb5d7bf88fbc58a0b2cefd5ec671e2d7181 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Many recipients of stock dividends look upon them as distributions of corporate earnings, and usually in an amount equivalent to the [fair value](https://asc.understandingaccounting.org/glossary/f/#fair-value "The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.") of the additional shares received. If the issuances of stock dividends are so small in comparison with the shares previously outstanding, such issuances generally do not have any apparent effect on the share market price and, consequently, the fair value of the shares previously held remains substantially unchanged. ##### [505-20-05-3](https://asc.understandingaccounting.org/asc/505/20/#505-20-05-3) Pending content: no Source downloaded (UTC): 2026-09-10T00:37:32.565Z to 2026-09-10T00:37:32.565Z Record version: sha256:f3258f99c171884aed52bdfa6cf5d15dd20a1f62033999b52d2c55399d2e0fd1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2010-01](https://asc.understandingaccounting.org/updates/asu-2010-01/). ##### [505-20-05-4](https://asc.understandingaccounting.org/asc/505/20/#505-20-05-4) Pending content: no Source downloaded (UTC): 2026-09-10T00:37:32.565Z to 2026-09-10T00:37:32.565Z Record version: sha256:a46975994de5224c295068247a5541ce18edf21dfa99b7d3f0768b1601554bf8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If there is an increase in the fair value of a recipient's holdings, such unrealized appreciation is not income. In the case of a [stock dividend](https://asc.understandingaccounting.org/glossary/s/#stock-dividend "An issuance by a corporation of its own common shares to its common shareholders without consideration and under conditions indicating that such action is prompted mainly by a desire to give the recipient shareholders some ostensibly separate evidence of a part of their respective interests in accumulated corporate earnings without distribution of cash or other property that the board of directors deems necessary or desirable to retain in the business. A stock dividend takes nothing from the property of the corporation and adds nothing to the interests of the stockholders; that is, the corporation's property is not diminished and the interests of the stockholders are not increased. The proportional interest of each shareholder remains the same.") or [stock split](https://asc.understandingaccounting.org/glossary/s/#stock-split "An issuance by a corporation of its own common shares to its common shareholders 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, of obtaining wider distribution and improved marketability of the shares. Sometimes called a stock split-up."), there is no distribution, division, or severance of corporate assets. Moreover, there is nothing resulting therefrom that the shareholder can realize without parting with some of his or her proportionate interest in the corporation. ##### [505-20-05-5](https://asc.understandingaccounting.org/asc/505/20/#505-20-05-5) Pending content: no Source downloaded (UTC): 2026-09-10T00:37:32.565Z to 2026-09-10T00:37:32.565Z Record version: sha256:328b5dcde729279e6356a1a986c2bb1f9d60d20dbd4e1038d9017cc288736a9d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. See paragraph [260-10-55-12](https://asc.understandingaccounting.org/asc/260/10/#260-10-55-12) for earnings per share (EPS) guidance if the number of common shares outstanding increases as a result of a stock dividend or stock split.