The affect of this transaction on the ACB is shown here:<\/p>\n![\"Split](\"https:\/\/www.adjustedcostbase.ca\/blog\/wp-content\/uploads\/split_transaction_entry.png\")
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Occasionally a stock split occurs whereby the number of shares in a corporation is increased.\u00a0 For example, a 2-for-1 stock split doubles the number of outstanding shares.\u00a0 Each share is essentially divided into 2, such that each shareholder owns twice as many shares after the split occurs.\u00a0 All else being equal, the market capitalization will be unaffected, and each share will have a market value equal to half of the pre-split market value.<\/p>\n
In terms of adjusted cost base, the total ACB is unaffected.\u00a0 However, the ACB per share decreases according to the split ratio.\u00a0 For example, suppose a shareholder owns 100 shares of Royal Bank (RY) with a total ACB of $5,000.\u00a0 The ACB is ($5,000\/100 shares) = $50 per share.\u00a0 After a 2-for-1 split occurs, the shareholder will receive 2 shares for each share owned, resulting in 200 shares.\u00a0 The total ACB remains the same at $5,000.\u00a0 However, the ACB per share is now equal to ($5,000\/200 shares) = $25 per share.<\/p>\n
Although less common, reverse splits can also occur.\u00a0 For example a 1-for-2 ratio indicates that the number of shares will be cut in half.\u00a0 Similarly, the total ACB will remain the same but the ACB per share will increase accordingly.<\/p>\n
AdjustedCostBase.ca<\/a> supports the reporting of splits.\u00a0 Following the example above, a split transaction can be entered as follows:<\/p>\n The affect of this transaction on the ACB is shown here:<\/p>\n<\/a><\/p>\n
![\"Split](\"https:\/\/www.adjustedcostbase.ca\/blog\/wp-content\/uploads\/split_transactions.png\")
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