Last reviewed: July 2026.
A share issue raises equity finance by issuing new ownership instruments. Accounting must distinguish legal share capital, other contributed equity, directly attributable issue costs and any instrument terms that create a financial liability.
The basic cash entry is simple, but classification, pricing, partly paid shares, non-cash consideration and earnings-per-share effects require careful analysis.
Share issue workflow
| Step | Accounting task | Primary evidence |
|---|---|---|
| Authorisation | Confirm class, number, price and terms | Board and shareholder approvals |
| Subscription | Record application or subscription money | Registrar and bank records |
| Allotment | Recognise issued capital and other contributed equity | Allotment records |
| Issue costs | Identify costs directly attributable to the equity transaction | Invoices and allocation schedules |
| Register update | Reconcile issued shares with legal records | Share register and filings |
Equity classification
IAS 32 classifies an instrument as equity when it evidences a residual interest and the issuer has no contractual obligation to deliver cash or another financial asset.
Mandatory redemption, unavoidable dividends or cash-settlement clauses can result in liability classification even when the instrument is legally called a share.
Ordinary share issue at par
A company issues 100,000 ordinary shares with nominal value 1 CU for 1 CU each:
- Debit cash 100,000 CU
- Credit share capital 100,000 CU
Issue above nominal value
If the same shares are issued for 3 CU each:
- Debit cash 300,000 CU
- Credit share capital 100,000 CU
- Credit share premium or other contributed equity 200,000 CU
Review the share premium guide.
No-par-value shares
Some jurisdictions do not use nominal value. The full proceeds may be credited to stated capital or another contributed-equity account according to local company law.
The accounting records should use the entity's actual legal capital structure rather than forcing a par-value model.
Share issue costs
Directly attributable incremental costs of issuing equity are deducted from equity, net of related tax effects. Costs that would have been incurred regardless of the issue are generally expensed.
When one transaction includes debt and equity, allocate costs on a reasonable basis to the relevant components.
Partly paid shares
When shareholders have paid only part of the issue price, recognise amounts based on the legal and contractual rights created. Any receivable from shareholders should be assessed for presentation, enforceability and recoverability.
Shares issued for non-cash assets
A company may issue shares to acquire property, services or a business. Measure the transaction under the applicable Standard and allocate the equity amount between share capital and other contributed equity.
Shares issued in a business combination follow IFRS 3 acquisition accounting.
Preference share issues
Preference shares can be equity, liabilities or compound instruments. Classification depends on redemption and dividend terms.
Use the IAS 32 types of shares guide.
Convertible instruments
When a share-related instrument contains a liability and an equity conversion feature, IAS 32 can require split accounting. The legal form alone does not determine presentation.
Rights issue
A rights issue offers existing shareholders new shares in proportion to current holdings, often below market price. Cash proceeds increase equity, while directly attributable costs reduce equity.
A discounted rights issue may contain a bonus element for IAS 33 earnings-per-share calculations.
Review the bonus and rights issue guide.
Bonus issue
A bonus issue capitalises an eligible reserve and issues shares without new cash:
- Debit retained earnings or another permitted reserve
- Credit share capital
Total equity is normally unchanged.
Employee share issues
Shares issued to employees for services can fall within IFRS 2. The accounting is not based only on cash proceeds because the entity receives employee services.
Treasury shares and reissues
When an entity reacquires its own equity instruments, consideration paid is deducted from equity. No gain or loss is recognised in profit or loss when treasury shares are purchased, sold or cancelled.
Basic and diluted EPS
New ordinary shares affect the weighted average number of shares from the date consideration is receivable. Bonus issues and bonus elements in rights issues require retrospective adjustments.
Statement of changes in equity
Show gross issue proceeds, share capital, share premium, issue costs and other material changes separately. Reconcile the accounting records to the legal share register.
The share capital accounting guide explains broader equity presentation.
Share applications and refunds
Public or widely offered issues may receive applications before allotment. Record application money according to the legal and contractual position, then transfer accepted amounts to equity and refund unsuccessful or excess applications promptly.
Oversubscription and scaling
When applications exceed available shares, the company may scale allocations, reject applications or apply excess money to later calls. Reconcile every applicant, share quantity, cash amount and refund.
Foreign-currency proceeds
Translate foreign-currency share proceeds at the transaction-date exchange rate. Any later exchange difference on an outstanding monetary subscription receivable follows the applicable foreign-currency requirements.
Issue controls
- verify approvals and instrument terms;
- reconcile applications, allotments and refunds;
- confirm bank receipts and non-cash consideration;
- separate nominal value and additional equity;
- identify qualifying issue costs;
- update the share register and statutory filings;
- review EPS and disclosure effects.
Common mistakes
- crediting all proceeds to share capital;
- treating all legally named shares as equity;
- expensing directly attributable equity issue costs;
- recognising bonus shares as new income or cash;
- ignoring partly paid and non-cash consideration;
- failing to update the share register;
- omitting EPS adjustments.
Key takeaway
A share issue increases contributed equity only when the instrument qualifies as equity. Separate legal capital, additional equity, transaction costs and EPS effects, and reconcile every issued share.
Official references: IAS 32, IAS 33 Earnings per Share, and IFRS 7.