What is equity surplus? Meanings of Equity Surplus

Rusq.org explains what is meant by Equity Surplus

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What is equity surplus? Meaning of Equity Surplus - Website Rusq
What is equity surplus? Meaning of Equity Surplus – Rusq Website

What is the definition of Equity Surplus?

  • Share premium, also known as capital premium in a joint stock company, is the difference between the par value of the stock and the actual issue price.

Share premium = (Issuing price of shares – Par value) x SL of issued shares

Example: A joint stock company ABC issues 120,000 shares, each share is priced at 100,000 VND, expected to raise 12 billion. Because of the market demand, ABC company sells each share for 160,000 dong, when they sell all the above shares, they get 19.2 billion dong. Therefore, the equity premium of company ABC is 7.2 billion.

Equity surplus is formed from the issuance of additional shares and this surplus will be converted into shares and transferred to the owner’s investment capital in the future. This surplus will not be considered as share capital until it is converted into shares and transferred to the invested capital of the company.

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Circular 19/2003/TT-BTC has a number of provisions as follows:

  1. The difference increased due to buying and selling treasury shares, the difference due to the issue price of new shares being larger than par value must be recorded in the capital surplus account, not in the financial income of the enterprise. Karma. This surplus does not include corporate income tax and value added tax.
  2. In case the selling price of treasury shares is smaller than the purchase price, and the selling price of newly issued shares is lower than the par value, this reduction shall not be accounted into expenses, and pre-tax profit must not be used to compensate. surplus capital must be used to compensate, in case the surplus capital is not enough, the company’s after-tax profits and funds must be used to compensate.
  3. The charter capital of a joint-stock company is adjusted to increase in the following cases: Transferring capital surplus to supplement charter capital and transferring this capital surplus must comply with the condition that the difference is between the selling price and the purchased cost of treasury shares, the company may use the entire difference to increase charter capital.
  4. If the company has not sold all its treasury shares, the company may only use the increase in the difference between the capital surplus and the total cost of unsold treasury shares to supplement its charter capital. If the total cost of unsold treasury shares is equal to or greater than the capital surplus, the company has not been adjusted to increase its charter capital by this capital source.

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