Is the excess amount over par that shareholders pay for stock of a company?
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Additional Paid-In Capital (APIC) represents the value received in excess of the par value from issuances of preferred or common shares. Show
 Table of Contents How to Calculate Additional Paid-In Capital (APIC)APIC, an abbreviation for “additional paid-in capital”, represents the excess amount paid in total by investors above the par value of a company’s shares. In other words, the additional paid-in capital is the amount that investors are willing to pay over the par value of the company’s shares. On the balance sheet, the additional paid-in capital line item is shown separately in the shareholders’ equity section below common stock, with the par value stated near it as reference. The par value of stock is normally set very low (e.g. $0.01), so the majority of the value received from investors for a capital raise will be recorded in the additional paid-in capital (APIC) account, rather than the common stock account. The additional paid-in capital is often used interchangeably with several terms, such as:
When a private company decides to go public in an initial public offering (IPO), its equity is offered to the public for the first time. As part of the IPO process, the company must set an appropriate price per each share within its charter – and that price is called the “par value” of the shares. The paid-in capital metric equals the sum of the par value and APIC, meaning APIC is intended to capture the “premium” paid by investors. Calculating the additional paid-in capital (APIC) is a two-step process:
Additional Paid-In Capital FormulaThe additional paid-in capital formula (APIC) is as follows. Additional Paid-In Capital (APIC) = (Issuance Price – Par Value) × Common Shares Outstanding For purposes of financial modeling, APIC is consolidated with the common stock line item and then projected with a roll-forward schedule. Ending APIC = Beginning APIC + Stock-Based Compensation (SBC) + Exercised Stock Options APIC vs. Market Value of Shares (Stock Price)One common misconception is that the sale price on the date of issuance represents the market value of the shares, i.e. the current share price of the company determined by the secondary trading in the open markets. The additional paid-in capital is instead based on the initial “offering price” of the shares on the date of issuance, such as the date of the IPO or the secondary offering. To reiterate, the APIC account can only increase if the issuer were to sell more shares to investors, in which the issuance price exceeds the par value of the shares. So movements in the company’s share price – whether upward or downward – have no effect on the stated APIC amount on the balance sheet because these transactions do not directly involve the issuer. Additional Paid-In Capital Calculator – Excel Model TemplateWe’ll now move to a modeling exercise, which you can access by filling out the form below. Submit Email provided Your Download is Ready Additional Paid-In Capital Calculation Example (APIC)Suppose a private company recently went public via an IPO where its shares were issued at a sale price of $5.00 each at a par value of $0.01 per share.
The excess of the issuance price over the stated par value is $4.99.
If the total number of common shares outstanding is assumed to be 10 million, how much in APIC would be recorded on the balance sheet? Upon multiplying the excess spread over the stated par value by the number of common shares outstanding, we arrive at an additional paid-in capital (APIC) value of $49.9 million. Additional paid-in capital (APIC, or sometimes referred to as capital in excess of par value) is the excess amount paid by an investor over the par value of a stock issue. In addition, contributions from an investor, such as cash or property that do not result in the issuance of new shares, are normally reflected in APIC as the par value of outstanding shares has not changed. APIC may be shown as a separate caption in the equity section of the balance sheet or combined with the related stock caption. 5.10.1 Notes received for common stockA reporting entity may receive a note, rather than cash, as a contribution to its equity. The note may be for the sale of common stock or a contribution to paid-in capital. The question arises as to whether the note should be presented as a receivable or as contra-equity. The predominant practice is to present the note receivable as contra-equity. indicates that reporting the note as an asset is generally not appropriate, except in very limited circumstances when there is substantial evidence of intent and ability to pay in a reasonably short time period. For nonpublic entities, evidence of intent and ability to pay in a reasonably short period may include circumstances when the notes are secured by irrevocable letters of credit or other liquid collateral, have a stated maturity in a short time period, or when the notes are collected prior to issuance of the financial statements. (codified in ) indicates that the SEC would permit recording such a note as an asset only if the note is collected prior to issuance of the financial statements. For other transactions with shareholders, see . PwC. All rights reserved. PwC refers to the US member firm or one of its subsidiaries or affiliates, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details. This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.
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Your recent searchesSuggested termsSuggested guidanceWarning 2{{isCompleteProfile ? "Setup your profile before Sign In" : "Profile"}}{{editProfile.email}} First name* {{validation.firstName.errorMessage}}Last name* {{validation.lastName.errorMessage}}Country or region* Required fieldFunctional role* Required fieldIndustry* Required fieldCompany* Company name must be at least two characters longNewsletter (optional) Yes, subscribe to the newsletter, and member firms of the PwC network can email me about products, services, insights, and events. Terms of Compliance* By providing your details and checking the box, you acknowledge you have read the Privacy Statement and Terms of Use (including the sections in each related to Registered Users).* Required fieldWhat is excess over par?Capital in excess of par is the amount paid by investors to a company for its stock, in excess of the par value of the stock. Par value is the legal capital per share, and is usually printed on the face of the stock certificate.
What means the amount paid by the shareholders in excess of the amount due?Any amount paid by investors that exceeds the par value is considered additional paid-in capital, or paid-in capital in excess of par. On the balance sheet, the par value of issued shares is listed as common stock or preferred stock under the shareholder equity section.
What type of account is paid in capital in excess of par?The stockholders' equity account that represents the amount paid to a corporation for its common stock that was in excess of the common stock's par value. This account is sometimes referred to as the premium on common stock (The par value of common stock is recorded in a separate stockholder's equity account.)
What is excess capital?Excess capital is here defined as the excess of a company's liabilities over its productive capital, i.e., the plant, equipment, materials, and stocks of unsold products and semi-fabricates that a firm holds. Firms' excess capital is held in financial assets (Toporowski 1993, chapter 3).
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