capital transactions excluded from net income

Equity9

1. 505-10Overall505 Equity

   ASC 505-10 is the residual "Overall" subtopic for equity — it covers equity matters not addressed in the other Equity subtopics (stock dividends/splits, treasury stock, spinoffs) or in other Topics such as 480 and 815. Its core rules are that transactions in an entity's own capital stock (and quasi-reorganization adjustments and transfers to/from appropriated retained earnings) never affect net income, that additional paid-in capital may not be used to relieve income of charges, and that notes received for stock are generally shown as a deduction from equity rather than as an asset. It also imposes extensive disclosures on the rights and privileges of outstanding securities, convertible preferred stock, redemption requirements, and liquidation preferences.

2. 505-20Stock Dividends and Stock Splits505 Equity

   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.

3. 505-30Treasury Stock505 Equity

   ASC 505-30 governs how an entity accounts for repurchases of its own outstanding common stock (treasury stock) and the later constructive or actual retirement or resale of those shares. The core rule is that treasury stock transactions are capital transactions: no gain or loss may be recognized in income or charged directly to retained earnings as profit, and differences between repurchase and resale/par amounts are allocated among additional paid-in capital and retained earnings. When shares are bought at a price differing from open-market price (e.g., from a specific shareholder), only the fair value of the shares is treasury stock cost and the excess is allocated to the other rights or privileges obtained and accounted for by their substance.

4. 505-50Equity-Based Payments to Non-Employees505 Equity

   ASC 505-50 formerly governed the accounting for equity instruments (shares, options, warrants) issued to non-employees in exchange for goods or services, including measurement date, performance commitment, and counterparty-performance concepts. Every paragraph in the subtopic has been superseded — chiefly by ASU 2018-07 (Improvements to Nonemployee Share-Based Payment Accounting), with the share-based-payment-as-consideration-payable-to-a-customer paragraphs superseded earlier by ASU 2014-09 (Revenue from Contracts with Customers). As a result, the subtopic contains no operative guidance; nonemployee share-based payment awards are now accounted for under ASC 718.

5. 505-60Spinoffs and Reverse Spinoffs505 Equity

   ASC 505-60 governs the pro rata distribution of nonmonetary assets that constitute a business to an entity's owners (a spinoff). Such distributions are recorded at the carrying (recorded) amount of the distributed business, reduced for any indicated impairment, and are never accounted for as a sale of the spinnee followed by a distribution of proceeds — even if the spun-off operations are sold immediately afterward. When the substance of the transaction differs from its legal form, the legal spinnee is treated as the accounting spinnor (reverse spinoff accounting).

6. 505-905Agriculture505 Equity

   This Subtopic governs how entities in the agricultural industry — principally agricultural cooperatives — classify and present equity. Its core rule is that cooperative earnings are split between patronage source earnings (from transactions with or for patrons) and nonpatronage earnings, and that allocated equities such as retained patronage allocations and per-unit retains are presented as equity when they have no fixed maturity date and are subordinated to all debt. Unallocated nonpatronage earnings are classified as retained earnings, and allocated equities become current liabilities only when the board formally acts to revolve them.

7. 505-942Financial Services—Depository and Lending505 Equity

   This Subtopic prescribes the note disclosures a bank, savings institution, credit union, foreign bank branch, or holding company must make about regulatory capital. At a minimum, the entity must describe the capital adequacy and prompt corrective action requirements, the actual/possible effects of noncompliance, whether it is in compliance (with required and actual capital ratios and amounts for each balance sheet date), and the prompt corrective action category it was assigned at its most recent notification (942-505-50-1). Noncompliance may, with other factors, raise substantial doubt about going concern.

8. 505-944Financial Services—Insurance505 Equity

   This Subtopic sets the equity-related disclosure requirements for insurance entities, focusing on statutory capital and surplus and how statutory accounting practices constrain dividends. Entities must disclose statutory capital and surplus, the amount needed to meet regulatory requirements, and restrictions on retained earnings available for dividends (505-944-50-1). When state-prescribed or permitted statutory accounting practices differ from NAIC statutory accounting practices and produce a significantly different statutory surplus or risk-based capital, the entity must describe the practice and quantify its monetary effect on statutory surplus (505-944-50-2 through 50-3).

9. 505-946Financial Services—Investment Companies505 Equity

   This Subtopic governs equity transactions and reporting for investment companies, focusing on capital share transactions and distributions to shareholders. It requires per-class disclosure of net asset value per share and the components of the net change in net assets from capital share transactions, along with tax-basis components of dividends paid. Return of capital is determined only at the fund level, not per class.