# ASC 505-20-30: Equity — Stock Dividends and Stock Splits — 30 Initial Measurement Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/505/20/#30-initial-measurement) 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): 2026-09-10T00:37:44.238Z to 2026-09-10T00:37:44.238Z Record version: sha256:ccd4ec77614009f2f890f05e53db13cb975dfe1aa18948c59db16737703b809a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 505-20-30: 30 Initial Measurement [Read section](https://asc.understandingaccounting.org/asc/505/20/#30-initial-measurement) SEC content: no ##### [505-20-30-1](https://asc.understandingaccounting.org/asc/505/20/#505-20-30-1) Pending content: no Source downloaded (UTC): 2026-09-10T00:37:44.238Z to 2026-09-10T00:37:44.238Z Record version: sha256:14d154e673fef994f5d3191f060a323ecc09c0468ca7d2c1331b90bd740d13b1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Section provides guidance for the issuer and recipient of either 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 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."). #### Issuer's Accounting for a Stock Dividend or Stock Split ##### [505-20-30-2](https://asc.understandingaccounting.org/asc/505/20/#505-20-30-2) Pending content: no Source downloaded (UTC): 2026-09-10T00:37:44.238Z to 2026-09-10T00:37:44.238Z Record version: sha256:6cc9d5da2c8c49b55ae027ca7ffb2f9b5ca3a9e59230073cc3d545c3c4647ea8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Section 505-20-25 provides guidance on determining whether a stock dividend or a stock split shall be accounted for according to its form or whether it shall be accounted for differently. The following guidance addresses the accounting for the substantive nature of the transaction as either a stock dividend or a stock split. ##### [505-20-30-3](https://asc.understandingaccounting.org/asc/505/20/#505-20-30-3) Pending content: no Source downloaded (UTC): 2026-09-10T00:37:44.238Z to 2026-09-10T00:37:44.238Z Record version: sha256:3ec1de6bb593171418d4b6e2b240eca0370443335156e4fbe28784f212886b50 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In accounting for a stock dividend, the corporation shall transfer from retained earnings to the category of capital stock and additional paid-in capital an amount equal to the fair value of the additional shares issued. Unless this is done, the amount of earnings that the shareholder may believe to have been distributed to him or her will be left, except to the extent otherwise dictated by legal requirements, in retained earnings subject to possible further similar stock issuances or cash distributions. ##### [505-20-30-4](https://asc.understandingaccounting.org/asc/505/20/#505-20-30-4) Pending content: no Source downloaded (UTC): 2026-09-10T00:37:44.238Z to 2026-09-10T00:37:44.238Z Record version: sha256:3e67e4470ea24f2294241bfe6573b5b00ad7dad32add65ae94aa201c2c352f61 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The accounting required in the preceding paragraph will likely result in the capitalization of retained earnings in an amount in excess of that called for by the laws of the state of incorporation; such laws generally require the capitalization only of the par value of the shares issued, or, in the case of shares without par value, an amount usually within the discretion of the board of directors. However, these legal requirements are, in effect, minimum requirements and do not prevent the capitalization of a larger amount per share. ##### [505-20-30-5](https://asc.understandingaccounting.org/asc/505/20/#505-20-30-5) Pending content: no Source downloaded (UTC): 2026-09-10T00:37:44.238Z to 2026-09-10T00:37:44.238Z Record version: sha256:49d3a7ec3826ec4f3ac744004a8f28cba38d766fc3048a247489970a134caa42 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In cases of closely held entities, it is presumed that the intimate knowledge of the corporations' affairs possessed by their shareholders would preclude any implications and possible shareholder belief as are referred to in paragraph [505-20-30-3](https://asc.understandingaccounting.org/asc/505/20/#505-20-30-3). In such cases, there is no need to capitalize retained earnings other than to meet legal requirements. ##### [505-20-30-6](https://asc.understandingaccounting.org/asc/505/20/#505-20-30-6) Pending content: no Source downloaded (UTC): 2026-09-10T00:37:44.238Z to 2026-09-10T00:37:44.238Z Record version: sha256:f3c7213fcb574bfe1321d87da451cb6810773cbaf866d63511866efa3483a160 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In the case of a stock split, there is no need to capitalize retained earnings, other than to the extent occasioned by legal requirements. #### Recipient's Accounting for a Stock Dividend or Stock Split ##### [505-20-30-7](https://asc.understandingaccounting.org/asc/505/20/#505-20-30-7) Pending content: no Source downloaded (UTC): 2026-09-10T00:37:44.238Z to 2026-09-10T00:37:44.238Z Record version: sha256:f2d90bd3880a3056f2de2edf701ef30e3be2edab779f3ff23b77a37e28545807 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A shareholder's interest in the corporation remains unchanged by a stock dividend or stock split except as to the number of share units constituting such interest. Therefore, the cost of the shares previously held shall be allocated equitably to the total shares held after receipt of the stock dividend or stock split. When any shares are later disposed of, a gain or loss shall be determined on the basis of the adjusted cost per share.