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U.S. GAAP
Financial Accounting Review

Section 5520: Stock Dividends, Stock Splits

[U.S. GAAP Codification Topic]
505-20 Stock dividends and stock splits

1. Stock Dividends, Stock Splits
(1) Issuance of new common shares
--> to the existing shareholders

(2) Without consideration
--> Recipients do not pay for new shares

2. Stock Dividends
(1) Fair value of new shares issued is transferred
--> from retained earnings to capital stock and additional paid-in capital

(2) The number of shares outstanding is adjusted.

3. Stock Splits
(1) No transfer from retained earnings to capital stock
(2) Only the number of shares outstanding is adjusted.

4. Issuance of additional shares of
--> less than 20% or 25% of existing outstanding shares
--> is generally treated as a "stock dividend"

5. Accounting for Recipients
(1) "Total amount" of cost of shares does not change.
(2) "Cost per share" is adjusted.