eCFR :: 12 CFR 3 701 Capital and surplus.

The OCC further expressly reserves the authority to impose more stringent conditions than those set forth in paragraphs (f)(1) and (2) of this section to exclude any component of tier 1 or tier 2 capital, in whole or in part, as part of a national bank's capital and surplus for any purpose. Such banks and the officers, agents and employees thereof are also be subject to the provisions of and the penalties prescribed by Sections 334, 656 and 1005 of Title 18 of the United States Code, and are required to make reports of condition and the payment of dividends to the Federal reserve bank of which they become a member. Not less than three such reports may be made annually on call of the Federal reserve bank on dates to be fixed by the Board of Governors of the Federal Reserve System. The term capital as used in provisions of law relating to the capital of national banks shall include the amount of common stock outstanding and unimpaired plus the amount of perpetual preferred stock outstanding and unimpaired. Surplus is the amount of a bank's surplus fund as defined in Banking Law Section 110.

During the last decade, public companies have repurchased significant amounts of their common stock through share repurchase programs. In the future, to raise capital, these businesses could reissue treasury stock. (1) Allowance for loan and lease losses means the balance of the valuation reserve on December 31, 1968, plus additions to the reserve charged to operations since that date, less losses charged against the allowance net of recoveries. (8) Perpetual preferred stock means preferred stock that does not have a stated maturity date and cannot be redeemed at the option of the holder. Capital stock can serve as an umbrella term for more specific classifications, such as acquired surplus, additional paid-in-capital, donated surplus, or reevaluation surplus (which could pop up during appraisals).

The Electronic Code of Federal Regulations

However, par value is no longer required by some states; in other states, companies are allowed to set the par value at a minimal amount, such as $0.01 per share. The result is that nearly all of the price paid for a share of stock is recorded Capital Stock And Surplus Definition as additional paid-in capital (or capital surplus, to use the older term). If a company issues shares that have no stated par value at all, then there is no capital surplus; instead, the funds are recorded in the common stock account.

Thus, if the capital surplus term were still used, a company would acquire a capital surplus by selling its stock to investors at a price above the designated par value of the stock, with the incremental amount above the par value being identified as capital surplus. An uptick in M&A could also see more companies adjusting their balance sheets to account for capital surplus related accounting issues. In computing "net profits", which are the source of undivided profits, Banking Law
Section 109 permits a bank to include in gross income "realizable" profits resulting from
a revaluation of a foreign exchange position (109(2)(b)). In contrast, only "profits
actually realized" from the sale of securities, real estate or other property are includable.

More Definitions of Capital stock and surplus

However, to the extent that the Superintendent approves, an increase in
the book value of real estate used as the bank's place of business may be included in
gross income (109(2)(f)), and the Superintendent also may in her discretion permit any
other items to be included in gross income. (7) Mortgage servicing assets means the national bank-owned rights to service for a fee mortgage loans that are owned by others. If ABC Company were to sell 100 shares of its $1 par value common stock for $9 per share, it would record https://kelleysbookkeeping.com/current-ratio-calculator-working-capital-ratio/ $100 of the $900 in total proceeds in the Common Stock account and $800 in the Additional Paid-in Capital account. In earlier days, the $800 entry to the Additional Paid-In Capital account would instead have been made to the Capital Surplus account. Capital surplus is also a term used by economists to denote capital inflows in excess of capital outflows on a country's balance of payments. Some other scenarios for triggering a capital surplus include when the Government donates a piece of land to the company.