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Term |
Definition |
Consent dividend |
Retained earnings of a personal holding company, which, although not distributed to shareholders, are reported by the shareholders for federal income tax purposes as an ordinary dividend. The tax basis of the stock is increased by the amount of the consent dividend |
Constructive dividend |
Distribution to shareholders without a formal dividend declaration by the board of directors |
Cumulative dividend |
Preferred dividend that must be declared and paid for all periods, before any dividend may be declared and paid to common shareholders |
Deemed dividend |
A transaction that does not necessarily have the characteristics generally associated with a dividend, but nevertheless results in a transfer of value to the holder of an equity instrument that requires accounting similar to a dividend (e.g., accretion to redemption value on redeemable convertible preferred stock) |
Dividend arrearage |
Cumulative preferred dividends for prior periods not declared or paid |
Dividend equivalents |
Amounts paid to holders of unissued shares (e.g., unvested stock or options) in a stock compensation plan |
Dividend in kind |
Dividend paid by distributing property (including notes) of the reporting entity rather than cash |
Ex-dividend |
Term indicating that the quoted price of a share of stock excludes the value of a declared dividend; the term attaches from the record date, or a few days before the record date (to allow for the recording of transfers just prior to the record date), until the payment date |
Extraordinary (special) dividend |
Dividend in addition to the usual periodic dividend |
Liquidating dividend |
Distribution to shareholders in excess of earnings, representing a return of capital |
Nimble dividend |
Dividend declared from current year earnings despite an accumulated deficit from past operations |
Noncumulative dividend |
Preferred dividend to which the preferred shareholders lose their rights if the dividend is not declared in respect of the applicable period |
Nonparticipating dividend |
Preferred dividend that never exceeds a specified rate regardless of the dividends paid to common shareholders |
Optional dividend |
A dividend for which shareholders may choose to receive cash or shares |
Ordinary dividend |
Pro rata distribution to shareholders of cash, other assets (including evidences of indebtedness), or shares of capital stock declared by the board of directors |
Paid-in-kind (PIK) dividend |
Dividend paid in the form of additional shares of stock having a value equal to the specified dividend rate |
Participating dividend |
Preferred dividend in excess of a stipulated minimum rate, shared with the common shareholders (the preferred shareholders participate in the earnings of the entity) usually after the dividends paid to the common shareholders reach a prescribed amount per share. Fully participating dividends are shared, after the prescribed minimums, without limitation; partially participating dividends are shared only to a specified maximum amount per share |
Preferred dividend |
Dividend on preferred stock usually at a specified rate stated in dollars per share or as a percentage of par value, payable at stated intervals, usually quarterly |
Record date |
Date at which shareholders registered in the stock records will share in the dividend payment. This date is usually between the declaration date and payment date |
Scrip dividend |
A dividend paid in the form of promissory notes that may be negotiable, bear interest, and mature at different dates, and that is usually payable in cash |
Spinoff |
Pro rata distribution by a reporting entity of shares of a subsidiary without the surrender of the shares in the distributing reporting entity |
Split-off |
Distribution by a reporting entity of shares of a subsidiary in exchange for a portion of the shares in the distributing reporting entity |
Splitup |
Distribution by a reporting entity of shares of a subsidiary and new shares of its own stock in exchange for all of the old shares of the distributing reporting entity |
Stock dividend |
Dividend payable in shares of the reporting entity’s own stock |
Stock split |
Issuance of additional shares of stock at a fixed ratio in relation to current shares to present shareholders. See FG 4.4.4 for information on the distinction between stock dividends and stock splits |
Record date |
Date at which shareholders registered in the stock records will share in the dividend payment. This date is usually between the declaration date and payment date |
Stock dividend |
Less than 20-25% of the number of shares outstanding prior to the distribution |
Less than 25% of the number of shares outstanding prior to the distribution |
Less than 25% of shares of the same class outstanding |
Stock split |
Greater than 20-25% of the number of shares outstanding prior to the distribution |
Equal to or greater than 100% of the number of shares outstanding prior to the distribution |
|
Additional information |
Distributions of new shares that are less than 20-25% of those previously outstanding or that recur frequently are to be treated as stock dividends even if management representations to shareholders that it is a stock split |
Distributions greater than 25% but less than 100% of the number of shares outstanding prior to the distribution are treated as a stock dividend when the distributions assume the character of stock dividends through repetition of issuance under circumstances not consistent with the true intent and purpose of a stock split |
Distributions of over 25% may be accounted for as a stock dividend if they are part of a program of recurring distributions and accounting for them as a stock split would be misleading |
Dr. Retained earnings |
$500,000 |
|
Cr. Common stock – par value |
$100,000 |
|
Cr. Additional paid-in capital |
$400,000 |
Before the stock split |
|
Common stock (10 million shares authorized, 1 million shares issued and outstanding, par value $1) |
$1,000,000 |
Additional paid-in capital |
$4,000,000 |
After the stock split |
|
Common stock (10 million shares authorized, 2 million shares issued and outstanding, par value $0.50) |
$1,000,000 |
Additional paid-in capital |
$4,000,000 |
Before the stock split |
|
Common stock (10 million shares authorized, 1 million shares issued and outstanding, par value $1) |
$1,000,000 |
Additional paid-in capital |
$4,000,000 |
Dr. Additional paid-in capital |
$1,000,000 |
|
Cr. Common stock – par value |
$1,000,000 |
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