Glossary term
Stated Value
Stated value is an amount assigned to no-par stock for accounting or legal-capital purposes, often by a corporation's board.
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What Is Stated Value?
Stated value is an amount assigned to no-par stock for accounting or legal-capital purposes. A corporation's board may assign a stated value to shares when the stock does not have a formal par value, depending on the governing corporate law.
The stated value is not the stock's market price. It is an internal legal and accounting amount that can affect stated capital, legal capital, and how issuance proceeds are recorded in equity accounts.
Key Takeaways
- Stated value is usually associated with no-par stock.
- It can help determine stated capital or legal capital for corporate-law purposes.
- It is different from market price, book value, fair value, and par value.
- Amounts received above stated value may be recorded as additional paid-in capital.
- The rules depend on corporate law, charter documents, and board action.
How Stated Value Works
If a corporation issues no-par shares, its board may assign a stated value such as $1 per share. If the company issues 100,000 shares with a $1 stated value, $100,000 may be assigned to stated capital. If investors paid more than that, the excess may be recorded in another equity account such as additional paid-in capital.
This helps the company maintain equity records even when shares do not have a par value. It can also support legal-capital rules that restrict distributions of protected capital.
Stated Value Versus Related Terms
Term | Meaning |
|---|---|
Par value | Nominal value assigned to shares in the charter or corporate records. |
Stated value | Assigned amount for no-par shares in certain legal frameworks. |
Market price | Price at which shares trade or are sold. |
Book value | Accounting value based on financial-statement equity. |
Additional paid-in capital | Equity contributed above par or stated value. |
Financial Reporting Context
Stated value appears in equity accounting rather than valuation analysis. It helps explain how share issuance affects common stock, stated capital, and additional paid-in capital accounts. Investors may see related amounts in the shareholders' equity section of a balance sheet.
The number can be very small relative to what investors actually paid for the shares. That is normal. A company might issue shares at $20 while assigning a stated value of $1. The remaining $19 per share may be reflected as additional paid-in capital.
Why Companies Use It
Stated value can give no-par stock a capital-accounting anchor. It may help a corporation comply with corporate-law rules, maintain board records, and distinguish protected capital from contributed surplus or additional paid-in capital.
It can also reduce confusion created by par value. Many modern corporations use very low par values or no-par shares because par value no longer usually represents the economic value of a share.
Where It Can Mislead
Stated value should not be used to judge whether a stock is cheap or expensive. It does not estimate intrinsic value, liquidation value, or expected return. It also does not show how much cash the company has available.
The term can also be confused with stated capital. Stated value is the assigned amount per share or per class. Stated capital is an equity account that may result from applying that amount to issued shares. The two are related but not identical.
Stated value also affects how investors read the equity section. The common stock line may look small because stated value is low, while the larger economic contribution appears in additional paid-in capital. The split is an accounting presentation issue, not evidence that investors paid only the stated amount.
The Bottom Line
Stated value is an assigned amount for no-par stock used in legal-capital and equity-accounting contexts. It matters for corporate records and distributions, but it is not a valuation measure for investors.