10-06-2008, 07:28 PM
Dear Ahmad,
Please go through this thread in detail.
If some company/enity has to follow IFRSs, it will account for its investments (including bonus shares) either under IAS 39 or IAS 28, as the case may be.
While calculating fair value of investments (including bonus shares) all sort of shares have equal significance. The bonus shares will be valued at fair value and the resultant credit will be recorded as per IAS 39 either in reserves or in profit and loss account.
On the other hand if some investment falls under IAS 28, the bonus shares will also be considered to calculate the percentage of shareholding for recording post acquisition profits and reserves of the associates (as the overall number of shares would also be increased). If this is not done the equity held will be wrongly calculated. However, under this IAS bonus shares in their ownself will have no value and will be recorded only as an increase in the number of shares held, disclosed in the financial statements.
In allother cases, where entities are not following such accounting framework (like IFRSs), there would be no accounting entry for bonus shares in the books of account and these would merely be recorded in memrorandum record of the company. In financial statements these shares will also be shown seperately as part of investment without assigning any value. In this regard you can consult TR 15 issued by ICAP.
Regards,
KAMRAN.
