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APPENDIX 
Applications for listing which involve questions relating to stock divi- 
dends will be considered in the light of the foregoing. In view of the large 
and constantly increasing number of listings on the Exchange, either origi- 
nating in stock dividends or involving questions that have to do with stock 
dividends, an effort will be made to obtain for the investor such information 
as may place him in the position to determine in connection with stock divi- 
dends received by him, to what extent they constitute true stock dividends 
representing the capitalization of current or past earnings, and to what 
extent, if at all, they represent merely split-ups involving an expression in 
a new form of what was already his. In any event, it is felt that the indi- 
vidual investor should make such independent investigations as seem desir- 
able in order to be quite sure that he understands in each instance how he 
has been affected by the declaration of a stock dividend. 
When stock dividends are received by investment trusts, holding com- 
panies or other corporations, the manner in which these dividends are 
accounted for by the receiving company presents a problem somewhat dif- 
ferent from that attending the accounting for the payment of stock divi- 
dends by the declaring company. Current practice varies all the way from 
the policy of ignoring stock dividends in their entirety in the income account 
of receiving companies, to the policy of taking them into the income account 
whether they have been realized upon or not at the full market value on the 
date received. 
Uniform accounting practice today seems to favor as sound procedure 
the ignoring of stock dividends in the income account of receiving com- 
panies. However, it has been urged on behalf of investment trusts, holding 
companies and others, with what seems to us to be some measure of justi- 
fication, that a technical interpretation of the nature of stock dividends may 
operate to hamper management in the adopting of perfectly reasonable and 
proper dividend programs of their own, whether in cash or in stock, and 
may even under certain circumstances force them as recipients, for technical 
reasons, to realize upon stock dividends which for business reasons they 
would have preferred to hold. 
It may be that accounting practice will undergo certain modifications in 
the light of these new tendencies, but it is too early to form an opinion as 
to the direction that this modification is apt to take. It is possible that a 
schedule of all stock dividend received will suggest itself as a desirable 
addition to the annual report of investment trusts, holding companies and 
others; or, conceivably, a new departure in accounting theory may permit 
the inclusion of stock dividends in some form or other in the income 
accounts of receiving companies. 
At the present time, it appears as if the Exchange could go no further 
than to take the position that it will raise no objection to the method by 
which investment trusts, holding companies and others account for stock 
dividends received by them and not realized upon, provided there is the 
fullest disclosure of the procedure adopted, and provided that these are not 
included in the income accounts of the receiving companies at a greater 
dollar value per share than that at which they have been charged to income 
account or earned surplus account by the paying companies. The manner 
in which receiving companies account for stock dividends received by them 
and realized upon during the period under review is a matter which the 
committee will pass on in connection with each specific instance.