There are 2 kinds of stock dividends,
a) small (< 20% to 25%) and
b) big (not < 20% to 25%)
But, as per paragraphs 13 and 16 of Section B of ARB 43,
a) the small stock issues (<20% to 25% of previously outstanding stocks) will be deemed to be stock dividends, and
b) the big stock issues (not <20% to 25% of previously outstanding stocks) will be deemed to be stock split-ups.
As per paragraph 15 of ARB 43, for the big stock split-up issues, there will be no transfer entry required
from retained earnings to capital stock & surplus.
Is this answer acceptable in the upcoming CMA examination ?
Regards
Ra K Sankar
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Kumar Sankar Ra CA
Director/Manager
K Sankar Ra & Assoc
Gurgaon
India
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