Features of formation equity
Equity - is the cost of funds belonging to owners of the company. Equity can also be interpreted as a balance in assets after deducting liabilities of the company.
Changing the amount of equity is a measure of production efficiency as well as financial and investment activities. More fully reveal the value of equity functions that it performs in the cycle funds.
The value of equity is that it is a guarantee of financial independence of the company and the basis for the formation of its assets. In the course of business activities or equity built up, or "proyidayetsya." Only by maintaining equity company will be able to increase profits, raise funds investors enter the market debt.
The cost of equity is determined in accordance with the terms of the evaluation of assets in accounting, and therefore not the same as the market price of shares and assets of the enterprise as a whole. Nevertheless, the dynamics of this indicator in the financial statements is one of the most important characteristics of the development prospects of the company.
As seen from the scheme, equity is formed by contributions from owners who recorded in the statutes and by savings income in the industrial and economic activities. The proportion of donated property is little or no value.
More information about all changes in equity during the year is given in the form of number 4 annual "Report on equity", the contents of which are presented in Table. 7.2. According to this report, owners, investors and other interested parties are informed about the availability of equity increase (decrease) in its volume as a result of revaluation, net income (loss) contributions from owners, withdrawal of capital. Determine the policy of profit, the payment of dividends, the completion of the share capital, contributions to capital reserve. Additionally, the notes to the financial statements, the company provides information on the total number and par value of the shares that are expected to subscription, the total amount received from subscription shares, consisting of share capital for certain types and categories and more.
In terms of liability equity divided as follows:
- Share capital (registered in the public register);
- Additional capital (additional capital, donations capital reserve and retained earnings).
The authorized capital plays a major role in the functioning of the company. First, a start-up capital required for production and profit. Secondly, its scope can not be less than the amount prescribed by law (1250 minimum wages for joint stock companies, 625 minimum wages for limited liability companies). Third, the registered capital regulates the relations of property, distribution of dividends and management.
In accounting share capital, depending on the type and form of ownership serves as:
- Skladochnoho capital - in full partnership and trust for the company;
- Share capital - in cooperatives, credit unions, collective enterprises, etc. ;
- Authorized capital - in state and municipal enterprises;
- Share capital - in joint stock companies, limited liability companies and additional liability.
Sources of share capital are own funds, property and other assets of the founders. The contributions of participants and the founders of a company until the statutory fund might be: buildings, equipment and other tangible assets, securities, rights to use land, water and other natural resources, buildings, structures, intellectual property, funds, including foreign exchange. The procedure for evaluation of contributions to the charter capital determined constituent documents. Do not use in the formation of the authorized fund budget, credit resources and funds received bail.
The most complex system formation and change of the authorized capital established by law for public companies.
The State Commission on Securities and Stock Market decision of February 9, 2001 № 18 approved the Regulations on the procedure of registration of the shares and bonds in the new edition.
Registration of securities, information on their emissions and report on the results of subscription for shares carried out by authorized persons of the State Commission on Securities and Stock Market or its territorial bodies in accordance with established procedures and are the basis for making the issue of securities in the general register of securities holders.
This situation improves and simplifies the existing order of share of OJSC bonds and information on release.
According to the requirements of the new provisions of the share issue carried out in the following order:
- The decision to issue shares;
- Submission of documents for registration information to issue shares;
- Review of documents by the Securities and Stock Market within 10 days from the date of submission of the application and all required documents;
- Registration information to issue shares;
- Publication data registered not later than 10 days before the subscription for shares;
- If necessary, submit documents for registration of changes in information on the issue of shares (term amendments - to the 30-day period from the date of publication of information, but not later than 10 days before the subscription of securities);
- Changes in registration information within 15 days of submission of documents;
- Subscription of shares;
- Registration of the report on the subscription within 15 days from the date of submission of the application and all required documents;
- Submission of documents for registration of the shares no later than 60 days from the date of state registration statute or changes in the statute relating to changes in the share capital;
- Registration of the shares within 30 calendar days from the date of submission of the application and all necessary documents.
The open subscription for shares carried out in several stages:
1st stage. Published reports of open subscription for shares, which period may not exceed 6 months.
2nd stage. Persons wishing to purchase shares must submit to the founders of at least 10% of the stated shares and get a written commitment to selling the appropriate number of shares of founders.
3rd stage. If after 6 months subscription failed to cover the 60% of shares, joint stock company shall be deemed not established. Persons who have subscribed shares returned to them included amounts or other property.
4th stage. If the subscription is held, by the date of convening the constituent assembly persons who subscribed for shares must make contributions based on precedent least thirty% of the nominal value of shares. Where all the shares are distributed among shareholders, they should make the convening of at least 50% of the nominal value of shares.
5th stage. Not later than one year after the registration of the company's shareholders are obliged to pay the full cost of the shares. Otherwise, they pay a penalty of 105% per annum of the amount of overdue payment. In the non-payment for 3 months after the maturity corporation has the right to sell shares in due course.
While economic activity owners have the right to change the authorized capital, guided by economic expediency. Possible methods Change in share capital are shown in Fig. 7.6. However, any changes that are not registered in the prescribed manner, and is a violation punishable by a sentence of administrative fines for violations of accounting and reporting, can be canceled state registration, and it is eliminated.
Thus, changing the share capital need to make changes to the constituent documents and registration card.
For all types of change of share capital question about the order of distribution for contributions and amounts of shares, which were changing, if it is not related to the decision by some participants. Thus, in case of increase in share capital by means of specific investors displayed their share or proportion increases in contributions. If the authorized capital has increased as a result of revaluation of property, the amount of increase is distributed among the members in proportion to their share in the share capital at the time of renewal.
The main directions of use of additional capital may be the transfer of subsidiaries, the cost of issuing shares or bonds, taking the amount of wear on the record company at no charge receipt of fixed assets, write-off amount of markdown inventory items, realization of capital investments, intangible assets and other areas.
Since these areas using the additional capital can determine its basic functions:
- Financing costs for raising additional funds (issue of shares or bonds to finance their activities);
- Financing the acquisition of intangible assets and fixed assets;
- Covering the amounts of reduction of assets and the amounts of depreciation means that the company received compensation.
Features of formation of equity and displaying underlying transactions in financial statements are disclosed in the following examples.
Operating, investing and financing activities of the company affects the amount and structure of equity. As a result of all financial transactions that occurred during the reporting period is the balance on the date. This financial manager determines the amount and structure of equity in the balance is not only the fact of transactions conducted, but also forecast data of the enterprise. In the latter case, the balance sheet takes the form of the planning document.