- Stockholders' equity - is the residual value of the entity's assets, once all its liabilities have been deducted; deficit - is the debit balance in the retained earnings account, resulting from accumulated losses that exceed retained earnings;
- spin-off - is a form of divestment whose result is the creation of one or more entities, to which the spin-off company contributes all or part of its assets, liabilities and stockholders' equity; equity financial instrument - is any contract that evidences a residual interest in the assets of an entity after deducting all its liabilities. Shares and corporate shares are examples of capital financial instruments; other comprehensive income (ORI) - are income, costs and expenses, which, although already accrued, are pending realization, but also: a) their realization is expected to be medium or long-term and b) it is probable that its amount will vary due to changes in the fair value of the assets or liabilities that gave rise to them, for which reason they may not even be realized in part or in full; owner or investor - is all person who participates contractually or non-contractually in the economic benefits and risks of the net assets of another entity;Capital reserves - represent a segregation of the accumulated net profits of the entity, with specific purposes and created by decisions of its owners and / or legal requirements. Reserves are canceled when they are used or when the purpose for which they were created expires; comprehensive income - is the increase or decrease in the earned capital of a profit-making entity, derived from its operation, during an accounting period, originated by profit or loss net, plus other comprehensive income;comprehensive income - is the increase or decrease in the earned capital of a profit-making entity, derived from its operation, during an accounting period, originated by net profit or loss, plus other comprehensive income;comprehensive income - is the increase or decrease in the earned capital of a profit-making entity, derived from its operation, during an accounting period, originated by net profit or loss, plus other comprehensive income;split and inverse split - is the increase (split) or decrease (reverse split) in the number of outstanding shares that does not change the amount of the entity's capital stock and does not represent a change in the proportional participation of the owners in the capital accounting or the value of your investment; Net accumulated or retained profits or losses - represent the profits earned or losses incurred and that have not yet been distributed or applied by the owners; net profit or loss - is the residual value of the income of a profit-making entity, after having decreased its Relative costs and expenses recognized in the statement of comprehensive income.
Capital classification
- Contributed capital.
The contributed capital is made up of the contributions from the owners received by the entity and the amount of other financial instruments issued by the entity that qualify as capital. The capital stock includes contributions for future capital increases, share premiums and other financial instruments that, due to their economic substance, qualify as capital.
- Earned capital.
Earned capital includes the balances of accumulated net profits , including those retained in capital reserves, accumulated losses and, where appropriate, other accumulated comprehensive income. The treatment of ORI is established in NIF B-3, Statement of comprehensive income, and other NIF.
Valuation standards Distinction between capital and liabilities
The issuer of a financial instrument must classify it at the time of its initial recognition, based on its economic substance and not according to its legal form.
An owner relationship is considered to exist when the holder of the financial instrument is exposed to risks and is entitled to the returns of the entity. Another characteristic of an equity instrument is that it does not create a payment obligation for the entity. For example, a preferred share may have characteristics of equity or liability depending on the economic substance of the rights it confers (see NIF C-12 "Financial instruments with characteristics of liabilities and capital").
Valuation standards Capital stock
When the owners do not fully disclose the amount of the subscribed shares, the amount not disclosed must be subtracted from the subscribed capital stock to present the exhibited capital stock.
The unpaid amount of the subscribed shares should not be presented as an account receivable from the owners of the entity, even when it is protected by credit instruments.
Reclassification of unpaid subscribed capital.
| The Company "La Cachora Voladora, SA de CV" has a subscribed and paid capital stock of $ 500,000. | ||||||||||
| 1. The shareholders subscribe capital for $ 300,000 which is pending payment. | ||||||||||
| Banks | CxC shareholders | Social capital | ||||||||
| S) | 500,000 | one) | 300,000 | 300,000 | (R | R) | 300,000 | 500,000 | (S | |
| 300,000 | (one | |||||||||
| 500,000 | ||||||||||
| Note X to the financial statements: | ||||||||||
| Subscribed share capital | 800,000 | |||||||||
| (-) | Unpaid subscribed share capital | -300,000 | ||||||||
| Paid subscribed share capital | 500,000 | |||||||||
Valuation standards Contributions for future capital increases
They must be presented in a separate item within the contributed capital, as long as all the following requirements are met; otherwise, these contributions must be part of the liability:
- There must be a commitment of the parties established by resolution in the shareholders 'or owners' assembly, that these contributions will be applied for increases in capital stock in the future; therefore, its return is not foreseen before its capitalization; A fixed number of shares is specified for the exchange of contributions, since in this way whoever makes the contribution is already exposed to risks and has the right to the returns of the entity.
Reclassification of contributions for future capital increases, if the above requirements are not met.
| 1. The contributions to be capitalized do not have a meeting certificate that gives them such quality. | ||||
| Reclassification | ||||
| 2014 | D (H) | 2014 | ||
| Current liabilities: | ||||
| Providers | 800,000 | 800,000 | ||
| Accounts payable to related parties | 4,000,000 | 8,000,000 | 12,000,000 | |
| 4,800,000 | 12,800,000 | |||
| Stockholders' equity: | ||||
| Social capital | 11,000,000 | 11,000,000 | ||
| Contributions for future capital increases | 8,000,000 | -8,000,000 | 0 | |
| Accumulated deficit | 2,000,000 | 2,000,000 | ||
| Net profit for the year | 4,000,000 | 4,000,000 | ||
| 25,000,000 | 17,000,000 | |||
| Total liabilities and stockholders' equity | 29,800,000 | 29,800,000 | ||
Valuation standards Premium on issue of shares and other premiums
It is common practice that when placing shares are made, amounts are paid to issuers that exceed the nominal values of those shares. Once the payment of these excess amounts has been made, they must be recognized in an item called premium on issue of shares or premium on subscription of shares. The owners who made these payments do not have a preferential right over this additional capital, since all partners participate in this amount in proportion to the shares they own.
Valuation standards Acquisition of treasury shares
When an entity acquires its own shares, these are called treasury shares and are reduced from the capital stock. In the statement of comprehensive income, no profit or loss should be recognized on the acquisition, relocation, issuance or cancellation of the entity's own shares. The acquisition and subsequent relocation by an entity of its own shares represent transfers between the entity and its owners and not operations; Any amount paid or received must be recognized directly in capital.
When an entity acquires its own shares, these must be reduced from the contributed capital, except when acquired on behalf of a third party, in which case that transaction represents an account receivable and not a capital decrease.
Valuation standards Reimbursement and amortization of shares
The reimbursement of capital stock consists of delivering to the shareholders a certain amount to redeem the shares, which must be recognized by reducing the contributed capital. If the amount exceeds the book value of the shares, such excess must be applied to retained earnings.
In the cases in which the bylaws of the entity provide for the amortization of shares against retained earnings, such amortization should be considered as a reduction to earned capital.
Valuation rules Splits and reverse splits
Splits are increases and reverse splits are decreases in the number of outstanding shares of an entity that do not represent a change in the owners' proportional share of the entity's equity or in the value of their investment. Entities carry out splits and reverse splits for many different reasons, one of which is to promote greater commercialization of them in the market.
| Stock split example | |||
| Shareholders | Actions | Value | Total |
| 10 | 10 | 100,000 | 1,000,000 |
| 10 | 100 | 10,000 | 1,000,000 |
Valuation standards Capital reserves
Capital reserves are created through an allocation of retained earnings for a specific purpose. They can be created to comply with a legal order, such as the creation of the legal reserve provided for in the General Law of Mercantile Societies or by a decision of the owners, to protect the stability of the entity.
Dividends
Common dividends decreed pending payment, as well as preferential dividends once the corresponding profits have been approved by the owners, must be reduced from stockholders' equity and reflected as a liability in charge of the entity.
Accounting record and presentation of decreed dividends
| 1. In the minutes of the meeting of 2014, dividends for $ 500,000 are decreed. | |||||
| Adjustment | |||||
| 2014 | D (H) | 2014 | |||
| Current liabilities: | |||||
| Providers | 500,000 | 300,000 | |||
| Dividends payable | 0 | 500,000 | 500,000 | ||
| 500,000 | 800,000 | ||||
| Stockholders' equity: | |||||
| Social capital | 2,000,000 | 2,000,000 | |||
| Retained earnings | 6,000,000 | -500,000 | 5,500,000 | ||
| Net profit for the year | 1,000,000 | 1,000,000 | |||
| 9,000,000 | 8,500,000 | ||||
| Total liabilities and stockholders' equity | 9,500,000 | 9,300,000 | |||
Valuation rules Repayment of losses
In the event that the owners reimburse, in cash or property, losses of the entity, the corresponding amounts should be considered as a reduction of the accumulated losses.
Spin-off effect
A spin-off occurs when a company called the splitter contributes en bloc, without being extinguished, part of its assets, liabilities and capital to another or other newly created entities called spun-off or decides to extinguish and divides all or part of its assets, liabilities and capital into two or more parts that are contributed en bloc to other newly created entities.
Presentation rules
The presentation of the different concepts that make up stockholders' equity must be made in the statement of financial position or in the notes to the financial statements, with sufficient detail to show each of them, including firstly those that make up the contributed capital, followed by those that make up the earned capital.
Contributions for future capital increases, the capital component of convertible bonds and other financial instruments that are essentially capital, that meet the requirements to be considered stockholders' equity, must be presented in a caption of contributed capital, for separated from the capital stock.
Validity
The provisions contained in this NIF come into effect for fiscal years beginning on January 1, 2014.
Transient
Upon entry into force of this FRS, the financial statements for prior periods that are included for comparative purposes, in accordance with FRS B-1, Accounting changes and corrections of errors, must be presented retrospectively reformulated, to give effect to the new provisions. contained in this NIF and disclose in its notes what refers to the new provisions.
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