Abstract This article reviews generally accepted accounting principles (GAAP) relating to stock dividends and stock splits. The economic impact of these stock distributions is considered, and current GAAP in this area are evaluated within this economic context. In addition, textbook treatment of stock dividends and stock splits is evaluated through analyzing coverage in nine recent editions of intermediate accounting textbooks. Based on this analysis, a different approach to textbook coverage is recommended. This recommended coverage would emphasize the economic substance of these distributions, rather than concentrating on their accounting and legal distributions. The article ends with a call for increased classroom emphasis on the trade-off between economic substance and legal form in developing accounting principles.
Monahan et al. (Sat,) studied this question.