Ms. Imelda P. Maiquez

July 13, 1993 Ms. Imelda P. Maiquez Cagayan Electric Power & Light Co.,Inc. Eight Flr. Strata 100 Bldg.,Emerald Ave., Ortigas Complex, Pasig, Metro Manila M a d a m : This refers to your letter requesting opinion on the following queries: 1. What should be the basis of valuation of the treasury shares to be issued as stock bonus, at par value, acquisition cost or book value? prcd 2. If valuation is based on book value, should revaluation surplus be included? Treasury shares are considered as property acquired by the corporation which may be disposed of like any other property, for a reasonable price to be fixed by the Board of Directors. The pertinent provision of the Corporation Code provides: "SECTION 9. Treasury shares . Treasury shares are shares of stock which have been issued and fully paid for, but subsequently reacquired by the corporation by purchase, redemption, donation or through some other lawful means. Such shares may again be disposed of for a reasonable price fixed by the board of directors ." (Emphasis supplied) In the instant case, the corporation is not selling its treasury shares for a price but giving them out as bonuses. Bonus, as the term implies, is formally given out as additional compensation for satisfactory service rendered. Under this concept, bonus takes the form of additional expense on the part of the paying corporation for services rendered by the grantees. Thus, for accounting purposes, these treasury shares given out as bonuses should in accordance with the Generally Accepted Accounting Principles, be recorded and valued as expenses at their acquisition cost ,and therefore, revaluation surplus should not be included in the valuation. prcd Please be guided accordingly. Very truly yours, (SGD.) ROSARIO N. LOPEZ Chairman