Value of rights — Accounting glossary

Specify whether a quoted right attaches to one existing share or represents the entitlement to buy one new share. Under the simple model, the right per old share equals the cum-rights price minus TERP. The entitlement to buy one new share equals TERP minus the subscription price; the two figures are related by the rights ratio. Actual traded rights values can differ because of market movements and terms. Selling or exercising rights is different from allowing them to expire unused.

Worked example

In a one-for-four issue with old price $6, issue price $4 and TERP $5.60, the right per existing share is $0.40. Four such rights are needed for one new share and together are worth $1.60, equal to $5.60 − $4.

Common mistake

Quoting $1.60 per existing share when that amount is the entitlement associated with buying one new share.

Where it appears in your exams

Qualification	Exam	Relationship	Period
ACCA	AFM	Supporting	September 2026–June 2027
ACCA	FM	Direct	September 2026–June 2027