Stated value definition
/What is Stated Value?
Stated value is the amount assigned to a share of stock and recorded in the issuer's accounting records. This value is only assigned when a share has no par value. The amount of the stated value increases the capital stock account of the issuer when a share is issued. The amount recorded is typically quite low, in the range of $0.01 to $1. A business is not supposed to issue dividends or buy back shares if doing so will reduce its capital stock account below the amount represented by the stated value of its shares.
The stated value is unrelated to the current market price of a share.
Example of Stated Value
A company sells 100 common shares to investors for $10 per share. The stated value of each share is $0.10. This transaction is recorded as $10 to the Common Stock account (which is the stated value of the shares) and $990 to the Additional Paid-In Capital account (which is the excess amount paid to the issuer). The journal entry format is as follows:
FAQs
How Does Stated Value Differ from Par Value?
Stated value is an amount designated by the board of directors for no-par stock, while par value is fixed in the corporate charter. Par value represents the minimum legal capital per share, whereas stated value serves the same purpose but offers more flexibility. Stated value can be set at issuance with minimal formalities, while par value changes usually require charter amendments.