Issue of Shares for Consideration Other Than Cash

Introduction

A company does not always receive cash when it issues shares. Sometimes it buys an asset, or an entire running business, and pays the seller in shares instead of money, and sometimes it gives shares to promoters or underwriters in return for their services. These are issues of shares for consideration other than cash. This chapter studies the situations in which such issues arise and how they are recorded.

Meaning

An issue of shares for consideration other than cash is an allotment of shares where the payment received by the company is something other than money, most commonly a fixed asset such as land, building or machinery, or a going business taken over from a vendor. No cash passes through the bank for these shares; instead the value of the asset or business acquired is treated as the payment for the shares.