Lecture On Shareholders' Equity
Lecture On Shareholders' Equity
EXISTENCE OR OCCURRENCE
A. To determine the validity of recorded shareholders' equity balances and
whether the transactions actually occurred
1. Obtain schedule of shareholders' equity accounts and reconcile to the
general ledger balances.
2. Review authorizations and terms of share issue
3. Confirm shares outstanding with registrar on share and transfer agent
4. Inspect share certificate books
5. Inspect certificates of shares held in treasury
COMPLETENESS
B. To determine whether recorded shareholders' equity accounts reflect
all data that should be recorded
6. Perform analytical review procedures
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Prepared by:
TM
Daniel John F. Falo, CPA, MBA
AUDIT OF SHAREHOLDERS' EQUITY
independent registrar.
B. Share certificates should be serially prenumbered by the printer and that the
authority for signing and issuing the certificates be designated by the board
of directors
C. As individual certificates are issued, corresponding records of the certificates
should be prepared containing the name and address of the shareholders and
the number of shares issued to each
D. Cancelled certificates should be mutilated and any necessary documentary
stamps should be attached to the cancelled certificates.
E. Entries for share issuances and transfers should be made by a person who does
not have authority to sign and issue certificates.
Retained Earnings
Stock dividend => 20% - charged to RE at par or stated value
Stock dividend < 20% - charged to RE at FV or par or stated value, whichever is higher.
Property dividend - charged to RE at fair value on the date of declaration, at year-end
and the date of settlement.
The property to be distributed is measured at year end, at the lower between
carrying amount or fair value less cost to distribute.
On the date of settlement, the difference between the dividend payable and
the carrying amount of the property is gain or loss on distribution of
property dividend
Items affecting unappropriated retained earnings include:
1. Prior period errors
2. Net income or loss
3. Dividends declared or paid
4. Changes in accounting policy
5. Realization of revaluation surplus and apprpriated retained earnings
fa
________________
Prepared by:
TM
Daniel John F. Falo, CPA, MBA
AUDIT OF SHAREHOLDERS' EQUITY
Share options
Fair value of share options on the date of grant is recognized as total compensation
The total compensation is allocated over the vesting period.
If the the share options vest immediately, the total compensation is
recognized immediately.
Intrinsic value of the share options is measured at every year-end until the date
of settlement
Share appreciation rights -
The liability for the compensation is equal to the excess of the market price of the
share over a predetermined price.
Such liability is measured at every year-end until the date of settlement.
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Prepared by:
TM
Daniel John F. Falo, CPA, MBA