ACCA FR Syllabus B. Accounting For Transactions In Financial Statements - IAS 33 Bonus issue - Notes ^{8 / 12}

Additional shares are issued to the ordinary equity holders in proportion to their current shareholding, for example 1 new share for every 2 shares already owned.

No cash is received for these shares.

Double Entry

• Dr Reserves or Share premium
  Cr Share Capital

IAS 33 pretends that the bonus issue has been in place all year - regardless of when it was actually made.

We do this by multiplying the totals before the issue by a “bonus fraction”.

Bonus Fraction Calculation - Bonus issue

1 for 2 bonus issue - means we’ve now got 3 where we used to have 2 = 3/2 
2 for 5 - now got 7 used to have 5 = 7/5 
3 for 4 - now got 7 used to have 4 = 7/4

Example

1st Jan 100 shares in issue
1st July 1 for 2 bonus issue (i.e. 50 more shares)

• Weighted Average number of shares

  100 x 6/12 (we had a total of 100 for 6 months) = 50 x 3/2 (bonus fraction) = 75

  150 x 6/12 (we had a total of 150 for 6 months) = 75

  Total = 150