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05-28-2007, 04:40 PM,
Dear Friends

Please suggest me what is accounting treatment of <b>"Bonus Shares Received"</b> in the books of shareholder.

05-28-2007, 05:57 PM,

You can see the Technical Release (TR-15) issued by ICAP on thi issue.

The recepient will not make any accounting entry in his books of account. He will, however, enhance the number of shares held by him in the disclosure given in financial statements.

Bonus shares are normally paid out/issued by way of capitalization of accumulated profits and does not therefore increase the net worth of the issuing company.

Therefore, the share of shareholder/investee in the net assets also remains same. Therefore, bonus shares are not accounted for in value terms by the shareholders.


05-28-2007, 06:26 PM,
Thanks and regards..!
05-29-2007, 06:58 PM,

However, if some investments have to be valued under IAS 39 as available for sale on fair values, then the bonus shares will also be given the fair value and such value will be incorporated in the financial statements just crediting the fair value gain for the period. IAS 39 in this matter overrides the TR-15.

Further, if investments are in associates and have to be stated under equity method (IAS-28), again the bonus shares (just as number of shares) will be considered to calculate the equity held percentage and this way will carry the portion of their post acquisition profits/losses and direct movements in reserves. This is done as the total number of shares issue by such associte changes after issuing the bonus shares and when the investee has to calculate post acquisition share in profits, it has to consider its bonus shares for calculating latest equity held percentage. However, in this case there would be no other impact on valuation.

Best regards,

05-29-2007, 07:01 PM,

Even if investment is considered as held-to-maturity under IAS 39, it has to be initially recognised at fair value measurement and then afterwards at amortised cost. Therefore, even if such bonus shares are held-to-maturity investments, these have to be incorporated in the books of account at fair value initially.

Still, if applicable to such entity, IAS 39 overrides TR-15 through CO84 section 234.


05-30-2007, 11:36 PM,
Thanks for further contribution. I found a conflict between sec234 of CO84, ICAP Circular No11 of 2005 and and SECP SRO.
With refer to above circular the application of IAS 39 is not mandatory.


The Council of the Institute realising the practical problems being faced by the Small and Medium Sized companies in relation to compliance with some of the IAS / IFRS, has in its 176th meeting held on October 28, 2005 decided to revise paragraph 2.3 of TR-5, IASB Standards-Council’s Statement on Applicability. As per the revised paragraph 2.3, applicability of certain IAS/IFRS (as mentioned in the said paragraph) would not be deemed mandatory for companies identified therein.

A copy of the revised TR-5 along with Sectional Index of Section C of Part I of Members’ Handbook Volume II are enclosed.

Thanking you

Yours truly

Shahid Hussain
Deputy Director Technical Services

05-31-2007, 06:06 PM,

Initially this matter was discussed for small and medium size companies only and any exmption, if given, was only for such companies. Small and medium size industries were supposed to have problems in adopting/implementing some of the standards due to a number of limitations including the availability of professionally qualified staff members. These companies were specifically defined under the then TR-5 issued by ICAP.

One must keep in mind that despite the amendments made in section 234 of CO84 by companies amendment ordinance 2002, there were some shortcomings/disagreements. These existed due to collasion of the provisions of sec 234 itself as well as due to the stuck-up revision-requiring Fourth and Fifth schedules to the CO84. This has so many time been discussed. Afterwards, Fourth schedule was changed/revised but no revision has so far been made for 5th schedule in spite of some debates recently. The position of private limited is still in doubt despite the sec 234 has required all companies to be compliant of International Accounting Standards due to collasion with its own provisions (where it exempts such companies from attaching cash flow statement and statement of changes in equity with financial statements) and due to the variant requirements of 5th schedule which does not even necessitate the disclosure of accounting plocies by such companies in their financial statements.

Therefore, it was suggested to identify small, medium and large companies for allowing any exemptions in this regard. Typically in all cases listed companies are large companies, therefore, the issue materially remains revolving around private companies.

However, the work remained in progress in this regard and so many suggestions were collected from number of professionals (CAs) by ICAP. Eventually, ICAP has developed acounting standards for Small and Medium sized companies/entities separately and these standards have been endorsed by SECP as well. These standards have been issued roughly at the end of July 2006. The previous TR-5 has now no effect and all such companies have to identify theirselves as small or medium companies/entities and have to adopt and implement these locally developed standards. These stndards have clearly laid down criteria according to which any company/entity could be judged as to whether it is a small company or a medium company. The requirements for small companies/entities are not enormous. However, if we put some attention on the standard set for medium size companies, we can conclude that so much of IFRSs' basic requirements and guidelines have been embedded in this standard and its compliance will approximately create some harmoney in the basic recognition and measurement criterias.

Now if you will see this standard for medium size companies, you will understand that so much stipulated there-in for investments is as per IAS-39.

You can download these standards from ICAP's website.

Hope you will find it beneficial.

Best regards,

10-06-2008, 12:41 AM,

Hi all,

I will be glad if some one can answer my query bout the treatment of bonus shares. I have searched this forum but have not found any satisfactory answer. My question is how bonus shares are recorded in the accounts of the company that has received bonus shares. Hopefully forum members will help me out. Kindly give the reference of the IAS or other provions as well.
Thanking in advance
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.


10-26-2008, 08:15 PM,
Thank you KamranACA. Your information is very detailed. The doubts in my mind about treatment of bonus shares have been cleared. Thanks once again
08-03-2010, 06:59 PM,
I work for a mutual fund..would be a great help if someone could help me to understand how to treat bonus shares in financial statements including what IAS/IFRS standards does it fall?


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