Bonus (capitalisation) issues
A bonus issue gives existing shareholders additional shares without requiring them to pay cash. The company capitalises an eligible reserve by transferring an amount to share capital. Total equity is unchanged: its composition changes. In an FA question, use the stated ratio, nominal share value and reserve specified, subject to the relevant legal restrictions.
Worked example
A one-for-four bonus issue on 400,000 $1 shares issues 100,000 new shares and transfers $100,000 from an eligible reserve to share capital.
Common mistake
A bonus issue raises no new cash. A rights issue offers shares for payment and therefore has a different effect.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | FA | Direct | September 2026–June 2027 |
| ACCA | K1 | Direct | July 2027–August 2028 |
| CIMA | BA3 | Direct | Official assessment-window verification pending |
| FIA | FFA | Direct | September 2026–June 2027 |
Related terms
Also called: Capitalisation issue, Bonus issue