APPENDIX 
379 
New York Stock Exchange 
Further Announcement on Stock Dividends 
The following statement supplements and extends but does not alter the 
Report of the Special Committee on Stock Dividends adopted by the Gov- 
erning Committee on September I1, 1929. 
in the study of the questions leading up to that report and in considering 
the problems arising out of giving effect to it, the Committee on Stock List 
has reached the following definite conclusions, which it seems well to make 
public for the information of corporations desiring listing : 
As recognition of the importance of earnings in the evaluation of 
securities tends to be emphasized, the importance of an accurate segre- 
gated statement of Earned Surplus in the Balance Sheet does so like- 
wise. Accounting should be adapted to the end that this account should 
show at any given time the exact amount of realized undistributed 
earnings, either from date of organization, or, in the event of recapi- 
talization, from some fixed stated date. The fact that state laws may 
permit stock dividends to be paid without any charge against earnings 
or earned surplus or with only a nominal charge has no bearing upon 
the correct accounting procedure to be foliowed. 
An occasional large split-up, made for convenience in the form ot 
a stock dividend and capitalized at a nominal amount, whether charged 
against Earned Surplus or Capital Surplus is not objectionable, if 
accompanied by a statement that it is in effect a split-up. 
The issuance of periodical Stock Dividends with either no charge 
or with an insufficient charge against Earnings or Earned Surplus, 
while not illegal under the laws of some States, is apt to mislead stock- 
holders and is not regarded as good practice. If such dividends are 
declared they should be accompanied by a statement clearly indicating 
either that they are not true earned stock dividends, or, if actually 
earned but insufficiently charged against Earnings or Earned Surplus, 
that the method of accounting leaves in Earned Surplus an amount 
which may be again used for dividends without further earnings. 
In the accounting for Stock Dividends upon the books of the issuing 
Company, whether for stock with par value or without par value, 
Capital and Capital Surplus should be regarded together as the con- 
sideration, other than earnings, represented by the stock. The sum per 
share of these two accounts is the minimum amount, per share to be 
issued as a Stock Dividend, which should be charged against Earnings 
or Earned Surplus in order that such dividend may be termed a true 
earned Stock Dividend properly accounted for and in order that Earned 
Surplus may not include a fictitious amount available for further divi- 
dends without further earnings. 
In cases where there exist substantial uncapitalized assets, tangible 
or intangible, the amount of the charge against Earnings or Earned 
Surplus should be larger than this minimum amount. 
in cases where stock is issued either as interest upon funded debt 
or as a dividend upon stock of another class with a cash alternative, 
the amount of such cash alternative measures the minimum amount 
properly to be charged against Earnings or Earned Surplus. The effect 
of issuing stock as interest or dividends upon other securities should 
be merely to conserve cash and not to add to the apparent Earnings or