Bonus issues and rights issues
In this lesson, you'll learn the key differences between bonus issues and rights issues—two ways companies can increase shareholder value without paying cash dividends.
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In this lesson
- 0:00 Bonus issues and rights issues overview
- 0:33 What is a bonus issue
- 0:55 Understanding rights issues
- 1:28 Accounting treatment differences
- 2:08 Rights issue cost implications
About this lesson
Both involve issuing new shares to existing shareholders in proportion to what they already own, but bonus issues are free shares with no cost to you, while rights issues require you to pay a discounted price. Understanding when and how to account for each in your share pool is essential for Financial Reporting and taxation calculations, particularly when tracking your base cost for capital gains purposes. The lesson breaks down the mechanics of each share issue clearly. With a bonus issue, the company gives you free shares to keep shareholders happy while preserving cash—you simply add the new shares to your pool with zero cost. With a rights issue, you're offered the chance to buy additional shares at below market price—you add both the shares and their cost to your pool. Getting this distinction right matters because it directly affects how you calculate your acquisition cost and, ultimately, any capital gains tax liability when you sell.
Duration: 2m
Transcript
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