GAAP identifies stock dividends below 25% as small and, therefore, the dividend can be recorded in retained earnings at the market value of shares distributed.

Question

Quizplus · Accepted Answer

GAAP does indeed identify stock dividends below 25% as small and allows them to be recorded in retained earnings at the market value of shares distributed. This treatment is known as the small stock dividend exception. However, if the dividend is larger than 25% of the outstanding shares, it must be recorded at its fair value and recognized as a reduction in retained earnings.

GAAP Identifies Stock Dividends Below 25% as Small And, Therefore