# ASC 505-20: Equity — Stock Dividends and Stock Splits Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/505/20/) 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): 2026-09-10T00:37:28.663Z to 2026-09-10T00:37:57.398Z Record version: sha256:465807af49f13e9a3fafe17ca94b9afed0747060b489a2cd2cb456f6c70dae56 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 505-20: Equity — Stock Dividends and Stock Splits ### Machine-generated study aids ```json { "summary": "ASC 505-20 governs how corporations (issuers) and shareholders (recipients) account for stock dividends and stock splits. The core rule is substance over form: a small issuance (generally less than 20–25% of previously outstanding shares) is a stock dividend requiring capitalization of retained earnings at the fair value of the shares issued, while a larger issuance that materially reduces the unit market price is a stock split in substance, requiring capitalization only to the extent of legal requirements. Recipients recognize no income; they simply reallocate the cost of previously held shares over the larger number of shares.", "key_points": [ "A stock dividend or stock split involves no distribution or severance of corporate assets, so any increase in the fair value of a recipient's holdings is unrealized appreciation and is not income (505-20-05-4).", "The Subtopic applies to all corporations but not to distributions of shares of another corporation held as an investment, shares of a different class, rights to subscribe for additional shares, or same-class shares where each shareholder may elect cash or shares (505-20-15-1 through 15-3A).", "Issuances of additional shares of less than 20 or 25 percent of previously outstanding shares generally call for stock dividend treatment; larger issuances that materially reduce unit market price are stock splits in substance (505-20-25-2 through 25-3).", "For a stock dividend, the issuer transfers from retained earnings to capital stock and additional paid-in capital an amount equal to the fair value of the additional shares issued, which usually exceeds state-law minimum capitalization (par value) requirements (505-20-30-3 through 30-4).", "For a stock split — and for stock dividends of closely held entities where shareholders have intimate knowledge of the entity's affairs — retained earnings need be capitalized only to the extent required by law (505-20-30-5 through 30-6).", "A recipient allocates the cost of shares previously held equitably over the total shares held after the dividend or split, and gain or loss on later disposition is measured using the adjusted cost per share (505-20-30-7).", "When a stock dividend in form is a stock split in substance, the word 'dividend' should be avoided; if legal requirements compel its use, the transaction should be described as a 'stock split effected in the form of a dividend' (505-20-50-1)." ], "categories": [ "Debt and equity", "Recognition", "Initial measurement", "Earnings per share" ], "audience_level": "introductory", "student_note": "Exams love the 20–25% threshold: small issuances are stock dividends measured at fair value with a charge to retained earnings, while large ones are splits requiring only legal-minimum (par) capitalization. The common misunderstanding is that a shareholder recognizes dividend income on receipt — there is no income, only a reallocation of existing basis across more shares.", "related_topics": [ "260-10", "480-10", "505-10", "505-30" ], "key_concepts": [ "stock dividend", "stock split", "capitalization of retained earnings", "substance over form", "fair value of shares issued", "stock split effected in the form of a dividend", "cost allocation to shares held", "closely held entity" ] } ``` Source downloaded (UTC): 2026-09-10T00:37:28.663Z to 2026-09-10T00:37:28.663Z Record version: sha256:cfb3afa81d107a39a917a82f4915503958cc9043dee3aebd25740f9e9fc5a043 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 505-20-00: 00 Status [Read section](https://asc.understandingaccounting.org/asc/505/20/#00-status) SEC content: no ##### [505-20-00-1](https://asc.understandingaccounting.org/asc/505/20/#505-20-00-1) Pending content: no Source downloaded (UTC): 2026-09-10T00:37:28.663Z to 2026-09-10T00:37:28.663Z Record version: sha256:5ebe808a41d88b1338f638b584cdb48c08168781da125fd2b3e4ff47f2200ed5 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following table identifies the changes made to this Subtopic.
ParagraphActionAccounting Standards UpdateDate
Fair Value (3rd def.)AddedAccounting Standards Update No. 2012-0410/01/2012
Stock DividendAmendedAccounting Standards Update No. 2010-0101/05/2010
505-20-05-2AmendedAccounting Standards Update No. 2012-0410/01/2012
505-20-05-3SupersededAccounting Standards Update No. 2010-0101/05/2010
505-20-05-4AmendedAccounting Standards Update No. 2012-0410/01/2012
505-20-05-4AmendedAccounting Standards Update No. 2010-0101/05/2010
505-20-15-1AmendedAccounting Standards Update No. 2016-1912/14/2016
505-20-15-2AmendedAccounting Standards Update No. 2010-0101/05/2010
505-20-15-3AAddedAccounting Standards Update No. 2010-0101/05/2010
505-20-65-1AddedAccounting Standards Update No. 2010-0101/05/2010
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. Source downloaded (UTC): 2026-09-10T00:37:36.423Z to 2026-09-10T00:37:36.423Z Record version: sha256:79a93df328d67082d644c12a5c2eb76c298c6d2675cf59934819c31e4a279841 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 505-20-15: 15 Scope and Scope Exceptions [Read section](https://asc.understandingaccounting.org/asc/505/20/#15-scope-and-scope-exceptions) SEC content: no #### Entities ##### [505-20-15-1](https://asc.understandingaccounting.org/asc/505/20/#505-20-15-1) Pending content: no Source downloaded (UTC): 2026-09-10T00:37:36.423Z to 2026-09-10T00:37:36.423Z Record version: sha256:de59fb5230fee1ac5aba2fa780dbd8cd2d103d37b91802c3c75e36e22d82e04f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in this Subtopic applies to all entities that are corporations. #### Transactions ##### [505-20-15-2](https://asc.understandingaccounting.org/asc/505/20/#505-20-15-2) Pending content: no Source downloaded (UTC): 2026-09-10T00:37:36.423Z to 2026-09-10T00:37:36.423Z Record version: sha256:58158a780d24c03cd9061e625bca93e18d9668580cb2dcfc3fd654eb9b8cabe4 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in this Subtopic applies to all [stock dividends](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.") and stock splits, with specific exceptions noted in paragraphs [505-20-15-3 through 15-3A](https://asc.understandingaccounting.org/asc/505/20/#505-20-15-3). ##### [505-20-15-3](https://asc.understandingaccounting.org/asc/505/20/#505-20-15-3) Pending content: no Source downloaded (UTC): 2026-09-10T00:37:36.423Z to 2026-09-10T00:37:36.423Z Record version: sha256:848ed54d070ab70e87f82d2594ea74bee4ff02deccb6881606bc2fe60591eb66 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in this Subtopic does not apply to the accounting for a distribution or issuance to shareholders of any of the following: 1. a Shares of another corporation held as an investment 2. b Shares of a different class 3. c Rights to subscribe for additional shares 4. d Shares of the same class in cases in which each shareholder is given an election to receive cash or shares. ##### [505-20-15-3A](https://asc.understandingaccounting.org/asc/505/20/#505-20-15-3A) Pending content: no Source downloaded (UTC): 2026-09-10T00:37:36.423Z to 2026-09-10T00:37:36.423Z Record version: sha256:2631039b2b5aac9854a2f3d0efc659ba8d5d40c57cbd4e2e2a64d053ecfee311 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Item (d) in the preceding paragraph includes, but is not limited to, a distribution having both of the following characteristics: 1. a The shareholder has the ability to elect to receive the shareholder's entire distribution in cash or shares of equivalent value. 2. b There is a potential limitation on the total amount of cash that all shareholders can elect to receive in the aggregate. For guidance on recognition of an entity's commitment to make a distribution described in the preceding paragraph, see paragraph [480-10-25-14](https://asc.understandingaccounting.org/asc/480/10/#480-10-25-14). For guidance on computation of diluted EPS of an entity's commitment to make such a distribution, see the guidance in paragraphs [260-10-45-45 through 45-47](https://asc.understandingaccounting.org/asc/260/10/#260-10-45-45) . 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. 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. Source downloaded (UTC): 2026-09-10T00:37:47.525Z to 2026-09-10T00:37:47.525Z Record version: sha256:9ba683226aaa3c3bc3a864dbaeed51243fa434255ab6e4cff6068bc54acc99f1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 505-20-50: 50 Disclosure [Read section](https://asc.understandingaccounting.org/asc/505/20/#50-disclosure) SEC content: no ##### [505-20-50-1](https://asc.understandingaccounting.org/asc/505/20/#505-20-50-1) Pending content: no Source downloaded (UTC): 2026-09-10T00:37:47.525Z to 2026-09-10T00:37:47.525Z Record version: sha256:f0e06327fc9e8e5456ca0bffa22427acb58e74a18f0a5e494d441fb7bc33f9dc Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Paragraph [505-20-25-2](https://asc.understandingaccounting.org/asc/505/20/#505-20-25-2) identifies a situation in which 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.") in form is 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.") in substance. In such instances every effort shall be made to avoid the use of the word dividend in related corporate resolutions, notices, and announcements and that, in those cases in which because of legal requirements this cannot be done, the transaction be described, for example, as a stock split effected in the form of a dividend. Source downloaded (UTC): 2026-09-10T00:37:51.385Z to 2026-09-10T00:37:51.385Z Record version: sha256:93e2baa7839273fec5beadf0455aa2f1420e813f3d14d9168796c6105acc4a76 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 505-20-65: 65 Transition and Open Effective Date Information [Read section](https://asc.understandingaccounting.org/asc/505/20/#65-transition-and-open-effective-date-information) SEC content: no ##### [505-20-65-1](https://asc.understandingaccounting.org/asc/505/20/#505-20-65-1) Pending content: no Source downloaded (UTC): 2026-09-10T00:37:51.385Z to 2026-09-10T00:37:51.385Z Record version: sha256:d964dedea21c3293b25ab3d15dc79bcd28c96e7f47a7f34efd65847401c5ff43 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Paragraph superseded on 07/01/2010 after the end of the transition period stated in Accounting Standards Update No. 2010-01, _Equity (Topic 505): Accounting for Distributions to Shareholders with Components of Stock and Cash_. Source downloaded (UTC): 2026-09-10T00:37:53.461Z to 2026-09-10T00:37:53.461Z Record version: sha256:78e8b06d01f9bf123ee387ff0039477e2e2266ed8320e916b83ef3e4e1368084 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 505-20-S25: SEC 25 Recognition [Read section](https://asc.understandingaccounting.org/asc/505/20/#sec-25-recognition) SEC content: yes #### Accounting for Dividends Declared by a Subsidiary After Balance Sheet Date ##### [505-20-S25-1](https://asc.understandingaccounting.org/asc/505/20/#505-20-S25-1) Pending content: no Source downloaded (UTC): 2026-09-10T00:37:53.461Z to 2026-09-10T00:37:53.461Z Record version: sha256:0a943227cc7ce62a9d7f1035b3fa23aec17d2bd6bbd755f36334f3af3332a2d9 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. See paragraph [855-10-S99-1](https://asc.understandingaccounting.org/asc/855/10/#855-10-S99-1), SAB Topic 1.B, Question 3, for SEC Staff views on accounting for dividends declared by a subsidiary after the balance sheet date. #### Capital Structure Change After the Latest Balance Sheet but Before the Release of the Financial Statements ##### [505-20-S25-2](https://asc.understandingaccounting.org/asc/505/20/#505-20-S25-2) Pending content: no Source downloaded (UTC): 2026-09-10T00:37:53.461Z to 2026-09-10T00:37:53.461Z Record version: sha256:7d9d654ddc1f671e0018999eebe4e565392937d0ee1c174c34bcc90dce88271a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. See paragraph [505-10-S99-4](https://asc.understandingaccounting.org/asc/505/10/#505-10-S99-4), SAB Topic 4.C, for SEC Staff views on accounting for a change in capital structure after the latest balance sheet but before the release of the financial statements. #### Issuance of "Free Distributions" By Japanese Companies ##### [505-20-S25-3](https://asc.understandingaccounting.org/asc/505/20/#505-20-S25-3) Pending content: no Source downloaded (UTC): 2026-09-10T00:37:53.461Z to 2026-09-10T00:37:53.461Z Record version: sha256:a4286ef26bd82e143d7ad7d96b0af2026a703f1af507bec86c128b24bb9d1b6c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. See paragraph [505-20-S99-1](https://asc.understandingaccounting.org/asc/505/20/#505-20-S99-1), SAB Topic 1.D.2, for SEC Staff views on accounting for the issuance of "free distributions" of common stock by Japanese companies. Source downloaded (UTC): 2026-09-10T00:37:55.576Z to 2026-09-10T00:37:55.576Z Record version: sha256:945bfc404b77bf0a96a07c521c69df6e829b0415d86f0634613dc63556adf853 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 505-20-S50: SEC 50 Disclosure [Read section](https://asc.understandingaccounting.org/asc/505/20/#sec-50-disclosure) SEC content: yes #### Accounting for Dividends Declared After Balance Sheet Date ##### [505-20-S50-1](https://asc.understandingaccounting.org/asc/505/20/#505-20-S50-1) Pending content: no Source downloaded (UTC): 2026-09-10T00:37:55.576Z to 2026-09-10T00:37:55.576Z Record version: sha256:b0f612bde43f07326b7af0e8ab5b119f79e2fa984d070ee02c53a3e242c436cf Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. See paragraph [855-10-S99-1](https://asc.understandingaccounting.org/asc/855/10/#855-10-S99-1), SAB Topic 1.B.3, for SEC Staff views on disclosures pertaining to dividends declared after the balance sheet date. #### Capital Structure Change After the Latest Balance Sheet but Before the Release of the Financial Statements ##### [505-20-S50-2](https://asc.understandingaccounting.org/asc/505/20/#505-20-S50-2) Pending content: no Source downloaded (UTC): 2026-09-10T00:37:55.576Z to 2026-09-10T00:37:55.576Z Record version: sha256:e0885458015cba7e923dc426b4dcb744979b2666aac13f35d326895e507cf0a0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. See paragraph [505-10-S99-4](https://asc.understandingaccounting.org/asc/505/10/#505-10-S99-4), SAB Topic 4.C, for SEC Staff views on disclosures pertaining to a capital structure change after the latest balance sheet but before the release of the financial statements. #### Issuance of "Free Distributions" by Japanese Companies ##### [505-20-S50-3](https://asc.understandingaccounting.org/asc/505/20/#505-20-S50-3) Pending content: no Source downloaded (UTC): 2026-09-10T00:37:55.576Z to 2026-09-10T00:37:55.576Z Record version: sha256:79a10a4622baadd5e80ba96e93be0b0bd76b2d3643e65df03761e595de391264 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. See paragraph [505-20-S99-1](https://asc.understandingaccounting.org/asc/505/20/#505-20-S99-1), SAB Topic 1.D.2, for SEC Staff views on disclosures pertaining to the issuance of "free distributions" by Japanese companies. Source downloaded (UTC): 2026-09-10T00:37:57.398Z to 2026-09-10T00:37:57.398Z Record version: sha256:6ebb5a45e6a690872a57c06efc6ba32673f737c23a74f95ec2cd2eea4c8ad924 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 505-20-S99: SEC 99 SEC Materials [Read section](https://asc.understandingaccounting.org/asc/505/20/#sec-99-sec-materials) SEC content: yes #### SEC Staff Guidance ##### [505-20-S99-1](https://asc.understandingaccounting.org/asc/505/20/#505-20-S99-1) Pending content: no Source downloaded (UTC): 2026-09-10T00:37:57.398Z to 2026-09-10T00:37:57.398Z Record version: sha256:310a10abd4e816173c98a50245c8dd40357a6d25894685813569af5e5cf9d23c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following is the text of SAB Topic 1.D.2, "Free Distributions" by Japanese Companies. - Facts: It is the general practice in Japan for corporations to issue "free distributions" of common stock to existing shareholders in conjunction with offerings of common stock so that such offerings may be made at less than market. These free distributions usually are from 5 to 10 percent of outstanding stock and are accounted for in accordance with provisions of the Commercial Code of Japan by a transfer of the par value of the stock distributed from paid-in capital to the common stock account. Similar distributions are sometimes made at times other than when offering new stock and are also designated "free distributions." U.S. accounting practice would require that the fair value of such shares, if issued by U.S. companies, be transferred from retained earnings to the appropriate capital accounts. - Question: Should the financial statements of Japanese corporations included in Commission filings which are stated to be prepared in accordance with U.S. GAAP be adjusted to account for stock distributions of less than 25 percent of outstanding stock by transferring the fair value of such stock from retained earnings to appropriate capital accounts? - Interpretive Response: If registrants and their independent accountants believe that the institutional and economic environment in Japan with respect to the registrant is sufficiently different that U.S. accounting principles for stock dividends should not apply to free distributions, the staff will not object to such distributions being accounted for at par value in accordance with Japanese practice. - If such financial statements are identified as being prepared in accordance with U.S. GAAP, then there should be footnote disclosure of the method being used which indicates that U.S. companies issuing shares in comparable amounts would be required to account for them as stock dividends, and including in such disclosure the fair value of any such shares issued during the year and the cumulative amount (either in an aggregate figure or a listing of the amounts by year) of the fair value of shares issued over time.