Book Value as Applied to Capital Stock in a Corporation

September 21, 1989 BIR RULING NO. 203-89 21 (d) 000-00 203-89 S i r : This refers to your letter dated June 2, 1989 stating that your clients sold their shares of stock to another stockholder of the same domestic Corporation; that the shares sold are from thirteen (13) stockholders (eleven all (sic) their holdings, while two a portion only); that some of the shares sold were fully paid to the corporation, while the others are still with balances (subscription receivables) to the corporation, which balances were assumed by the buyer; and that the subscription receivable (unpaid subscription) balances are not in equal proportion to their (stockholders) holdings, meaning while others were fully paid on their subscription, some have either a smaller or bigger balance. Based on the foregoing representations, you now request a ruling on which of the two factors or divisor should be applied on the stockholder's equity in computing the book value per share: (a) total shares subscribed, or (b) that portion only as fully paid shares (total subscription less subscription receivable). cd i In reply, please be informed that book value as applied to capital stock in a corporation, is the book value of the net assets, divided by the number of outstanding shares of capital stock; it is based on the going values customarily reflected in balance sheet. Book value attaches only to outstanding shares of capital stock, and not to unissued or reacquired shares. (p. 70, A Dictionary for Accountants, Fifth Ed., Eric L. Kohler) Accordingly, in computing the book value per share, the total shares subscribed should be applied on the stockholder's equity as divisor. Very truly yours, (SGD.) JOSE U. ONG Commissioner