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Hello Mike,
Long time browser of the forum, first time poster,
I was solving a past paper exam (INT), and the question said:
“On 1 October 2001 a bonus issue of 1 new share for every 10 held was made from the revaluation reserve”
I was wondering if you could help me out in pointing out which IAS or IFRS specifically states that bonus issues can be issued from revaluation reserves.
Thanks in advance,
Keep up the good work! 🙂
I don’t believe that any IAS / IFRS specifically identifies a revaluation reserve as available for financing a bonus issue.
However, the revaluation reserve is a part of shareholders’ funds and the effect of financing a bonus issue from there is merely to move the shareholders’ entitlement up the balance sheet.
Equally, I don’t know of any IAS / IFRS that specifically disallows such a use of the revaluation reserve.
And if the question states that that is what has happened and doesn’t then go further by asking, say, “comment on the use of the revaluation reserve for financing the bonus issue” then I see nothing wrong with the treatment
Ok?
Ok, great! Thank you! 🙂
Say, for the sake of argument that it did, – you never know what could come up – how can one elaborate on that?
Say for 2-3 points.
Thanks again.
On the basis that I know of no reason why the revaluation reserve could not be used to finance a bonus issue, the only way that I would be made aware of the prohibition would be if the examiner were to ask as question similar to the one I have postulated.
If he did ……… I’ve just said that I don’t know why it couldn’t be used, ss how could I expand on it? I’d probably wander off into the allowable uses of the share premium account and take it from there 🙂
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