What is capital surplus? Details of regulations and calculations

 Now, the term surplus capital must be familiar to those operating in the field of economics and business investment. This term appears a lot in the financial reports of joint stock companies today. So what is the concept of capital surplus? Or what are the regulations and how to calculate capital surplus? Please follow our article below immediately.

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1. Origin of the concept of surplus

The term surplus is understood as the amount of money difference from the value of the goods brought to the owner after deducting the costs the owner spent to produce that type of goods.

Specifically, workers will use production materials to create goods that include waste of spent materials and new value due to the workers’ abstract labor. And this new value is surplus value, so living labor is the source of surplus value.

2. Definition of share premium

The definition of surplus equity is also called capital surplus by business investors and is understood as the difference between the par value of the stock and the market price of the issued stock. In there:

  • Par value of a stock is the value of the stock pre-determined by the enterprise. On the current market, each share is listed with a common par value of 10,000 VND.
  • Market price is the actual value that investors have to spend to own that number of shares. However, this value will vary, and the change will depend on the development potential of that business and other macro factors.

3. Summary of factors affecting share premium

In order for the formula to calculate share premium to be implemented most accurately, readers need to clearly understand the factors that affect them such as:

  • Political, economic and social fluctuations cause stock prices to fluctuate erratically.
  • Businesses are heavily influenced by public opinion. If there is any bad information or unfavorable rumors, the value of that business’s shares will decrease significantly.
  • The price of stocks is influenced by the law of supply and demand.
  • Growth rate depends on capital surplus.
  • Along with a number of other factors that have great influence such as conversion rates, domestic GDP growth rate, interest rates,…

4. Standards regulating capital surplus in the business model

Currently, according to the issued Enterprise Law, businesses can completely offer shares equal to or higher than the registered par value of shares. However, some of the following standards must still be complied with:

4.1. Accounting regulations

Stock offering activities used to mobilize capital are not part of the business activities of the enterprise, so the share capital surplus will be accounted into the capital surplus account. And it is not allowed to be accounted for in the business’s income.

4.2. Tax exemption

Because capital surpluses are not a source of income from business activities. Therefore, businesses will not be subject to income tax or value added tax.

4.3. Decreased gap in capital resources

Currently, there are a few cases where corporate shares are traded at prices less than par value. Therefore, there will be a decrease in the total capital of the enterprise.

For example:

In 2022, ABC Company (stock code: ABCI) will issue nearly 20,000,000 shares, with par value of 10,000 VND/share. However, at that time, ABCI’s shares were trading at a price of 7,000 VND/share. In conclusion, the reduction difference is:

(7,000 – 10,000) x 20,000,000 = – 60,000,000,000 (minus 60 billion VND)

And this difference will not be included in cost accounting. Instead, businesses will use the previous capital surplus to compensate. In case the previous capital surplus is not enough, the business will have to use after-tax profits or other corporate funds.

4.4. Adjusting to increase the company’s charter capital

Through the transfer of capital surplus, businesses can increase their charter capital. However, the transfer must comply with the following regulations:

– Treasury shares

  • In case of selling all treasury shares: Enterprises can transfer all capital surplus to increase charter capital.
  • In case all treasury shares have not been sold:
  • Capital surplus > Total cost of unsold treasury stocks => Enterprises can only use the difference between the increase in capital surplus and the total cost of unsold treasury stocks to increase the company’s charter capital.
  • Capital surplus ≤ Total cost of unsold treasury stocks => Enterprises cannot adjust to increase charter capital.

– In case of issuing shares to implement investment projects

In this case, the enterprise can only transfer capital surplus to supplement charter capital after 3 years. And under the condition that the investment project has been completed and put into operation.

– In case of issuing shares to supplement business capital

Enterprises can increase charter capital after 1 year from the end of the issuance.

5. Details on how to calculate share premium

The formula for calculating share premium is shared by many people. However, to calculate the correct value, businesses should apply the correct formula. Below is the most accurate calculation formula today, specifically:

Share premium = (Market price – Par value) x Number of shares issued

In there:

  • Market price: is the actual price that investors have to pay to buy that stock. And this price will be small, equal to or greater than the listed face value. The change in price also depends on many other objective factors such as the development potential of the business or other macro factors.
  • Par value: is understood as the value of the shares already listed by that enterprise. The common par value of stocks currently on the market is 10,000 VND.

For example:

To make the definitions in the calculation easier for readers to understand, we will give an example of share premium below:

ABC Joint Stock Company operates and produces medical supplies. On March 15, 2022, the company issued 5,000,000 shares with a listed par value of 10,000 VND/share. With an expected revenue of 50,000,000,000 VND. However, due to the Covid-19 outbreak, the demand for these products has increased. Therefore, the company decided to increase the stock price to 20,000 VND/share. After the company sells all issued shares, it earns 100,000,000,000 VND. Thus, the difference between the initial price and the actual selling price is 50,000,000,000 VND => This value is called the capital surplus of ABC company.


Thus, above is all the general knowledge about the concept of capital surplus, details about the regulations and the most accurate capital surplus formula today. Hopefully with useful information from this article, readers will understand and update more knowledge for themselves.

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Danh mục: Business

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