# ASC 505-20-25: Equity — Stock Dividends and Stock Splits — 25 Recognition Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/505/20/#25-recognition) 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): 2026-09-10T00:37:41.401Z to 2026-09-10T00:37:41.401Z Record version: sha256:3563e088038965838eacb1ca8fe08ce6279c700090479eb93083bb7520f88454 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 505-20-25: 25 Recognition [Read section](https://asc.understandingaccounting.org/asc/505/20/#25-recognition) SEC content: no #### Criteria for Treatment as Stock Dividend or Stock Split ##### [505-20-25-1](https://asc.understandingaccounting.org/asc/505/20/#505-20-25-1) Pending content: no Source downloaded (UTC): 2026-09-10T00:37:41.401Z to 2026-09-10T00:37:41.401Z Record version: sha256:87b5cfadeea88e9b3fb4a5340a38c868b252c69ae00262ab1dec2d99cabbfd5f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Section provides guidance on determining whether stock dividends and stock splits are to be accounted for in accordance with their actual form or whether their substance requires different accounting. #### Stock Dividend in Form ##### [505-20-25-2](https://asc.understandingaccounting.org/asc/505/20/#505-20-25-2) Pending content: no Source downloaded (UTC): 2026-09-10T00:37:41.401Z to 2026-09-10T00:37:41.401Z Record version: sha256:2d5f988eef9daf57b74d834f350a0494121f2d72f7acc05a66e47a44c34c4417 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The number of additional shares issued as 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.") may be so great that it has, or may reasonably be expected to have, the effect of materially reducing the share market value. In such a situation, because the implications and possible shareholder belief discussed in paragraph [505-20-30-3](https://asc.understandingaccounting.org/asc/505/20/#505-20-30-3) are not likely to exist, the substance of the transaction is clearly that of a [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."). ##### [505-20-25-3](https://asc.understandingaccounting.org/asc/505/20/#505-20-25-3) Pending content: no Source downloaded (UTC): 2026-09-10T00:37:41.401Z to 2026-09-10T00:37:41.401Z Record version: sha256:710d50c398008f99570fb43ec91f26ddc39e03a820bd85da1d760f08d3899c05 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The point at which the relative size of the additional shares issued becomes large enough to materially influence the unit market price of the stock will vary with individual entities and under differing market conditions and, therefore, no single percentage can be established as a standard for determining when capitalization of retained earnings in excess of legal requirements is called for and when it is not. Except for a few instances, the issuance of additional shares of less than 20 or 25 percent of the number of previously outstanding shares would call for treatment as a stock dividend as described in paragraph [505-20-30-3](https://asc.understandingaccounting.org/asc/505/20/#505-20-30-3). #### Stock Split in Form ##### [505-20-25-4](https://asc.understandingaccounting.org/asc/505/20/#505-20-25-4) Pending content: no Source downloaded (UTC): 2026-09-10T00:37:41.401Z to 2026-09-10T00:37:41.401Z Record version: sha256:9c206c0e7f9bee8e42e44fe9bde6d7c97d2cdd187cac7bba85647a15c7599641 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A stock split is confined to transactions involving the issuance of shares, without consideration to the corporation, for the purpose of effecting a reduction in the unit market price of shares of the class issued and, therefore, of obtaining wider distribution and improved marketability of the shares. ##### [505-20-25-5](https://asc.understandingaccounting.org/asc/505/20/#505-20-25-5) Pending content: no Source downloaded (UTC): 2026-09-10T00:37:41.401Z to 2026-09-10T00:37:41.401Z Record version: sha256:a396c8b8be8eb24e0feac86b6d4f4cdf2491097c8988e009d37a6ebf940a6752 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Few cases will arise in which the aforementioned purpose can be accomplished through an issuance of shares that is less than 20 or 25 percent of the previously outstanding shares. ##### [505-20-25-6](https://asc.understandingaccounting.org/asc/505/20/#505-20-25-6) Pending content: no Source downloaded (UTC): 2026-09-10T00:37:41.401Z to 2026-09-10T00:37:41.401Z Record version: sha256:1cf89b498c36647dc4f9e04d3f12f0779e079a003ae5fade08622282684ee41b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The corporation's representations to its shareholders as to the nature of the issuance is one of the principal considerations in determining whether it shall be recorded as a stock dividend or a stock split. Nevertheless, the issuance of new shares in ratios of less than 20 or 25 percent of the previously outstanding shares, or the frequent recurrence of issuances of shares, would destroy the presumption that transactions represented to be stock splits shall be recorded as stock splits.