Par value, in

finance Finance is the study and discipline of money, currency and capital assets. It is related to, but not synonymous with economics, the study of production, distribution, and consumption of money, assets, goods and services (the discipline of fina ...

and

accounting Accounting, also known as accountancy, is the measurement, processing, and communication of financial and non financial information about economic entities such as businesses and corporations. Accounting, which has been called the "languag ...

, means stated value or

face value The face value, sometimes called nominal value, is the value of a coin, bond, stamp or paper money as printed on the coin, stamp or bill itself by the issuing authority. The face value of coins, stamps, or bill is usually its legal value. Howe ...

. From this come the expressions at par (at the par value), over par (over par value) and under par (under par value).

Bonds

bond Bond or bonds may refer to: Common meanings * Bond (finance), a type of debt security * Bail bond, a commercial third-party guarantor of surety bonds in the United States * Chemical bond, the attraction of atoms, ions or molecules to form chemica ...

selling at par is priced at 100% of face value. Par can also refer to a bond's original issue value or its value upon redemption at maturity.

Stock

The par value of

stock In finance, stock (also capital stock) consists of all the shares by which ownership of a corporation or company is divided.Longman Business English Dictionary: "stock - ''especially AmE'' one of the shares into which ownership of a company ...

has no relation to market value and, as a concept, is somewhat archaic. The par value of a share is the value stated in the corporate charter below which shares of that class cannot be sold upon initial offering; the issuing company promises not to issue further shares below par value, so investors can be confident that no one else will receive a more favorable issue price. Thus, par value is the nominal value of a security which is determined by the issuing company to be its minimum price. This was far more important in unregulated equity markets than in the regulated markets that exist today, where stock issuance prices must usually be published. The par value of stock remains unchanged in a bonus stock issue but it changes in a

stock split A stock split or stock divide increases the number of shares in a company. For example, after a 2-for-1 split, each investor will own double the number of shares, and each share will be worth half as much. A stock split causes a decrease of mark ...

. In accounting, the par value allows the company to put a

de minimis ''De minimis'' is a Latin expression meaning "pertaining to minimal things", normally in the terms ''de minimis non curat praetor'' ("The praetor does not concern himself with trifles") or ''de minimis non curat lex'' ("The law does not concern i ...

value for the stock on the company's financial statement. Par value is also used to calculate

legal capital A corporation's share capital, commonly referred to as capital stock in the United States, is the portion of a corporation's Shareholders' equity, equity that has been derived by the issue of Share (finance), shares in the corporation to a shareh ...

share capital A corporation's share capital, commonly referred to as capital stock in the United States, is the portion of a corporation's equity that has been derived by the issue of shares in the corporation to a shareholder, usually for cash. "Share capita ...

. Many

common stock Common stock is a form of corporate equity ownership, a type of security. The terms voting share and ordinary share are also used frequently outside of the United States. They are known as equity shares or ordinary shares in the UK and other Com ...

s issued today do not have par values; those that do (usually only in jurisdictions where par values are required by law) have extremely low par values (often the smallest unit of currency in circulation), for example a penny (

USD The United States dollar (symbol: $; code: USD; also abbreviated US$ or U.S. Dollar, to distinguish it from other dollar-denominated currencies; referred to as the dollar, U.S. dollar, American dollar, or colloquially buck) is the official ...

$0.01) par value on a stock issued at

$25.00/share. Most jurisdictions do not allow a company to issue stock below par value. Even in jurisdictions that permit the issue of stock with no par value, the par value of a stock may affect its tax treatment. For example, Delaware permits the issue of stock either with or without a par value, but by choosing to assign a par value, a corporation may significantly reduce its franchise tax liability.

No-par stock No-par stock is stock issued with no par or face value. In modern practice, par value is an antiquated concept and no-par stock is increasingly common. In most jurisdictions, the par value of a stock is the lowest possible price at which a compan ...

s have "no par value" printed on their certificates. Instead of par value, some U.S. states allow no-par stocks to have a stated value, set by the board of directors of the corporation, which serves the same purpose as par value in setting the minimum legal capital that the corporation must have after paying any dividends or buying back its stock. Also, par value still matters for a

callable common stock A callable bond (also called redeemable bond) is a type of bond (debt security) that allows the issuer of the bond to retain the privilege of redeeming the bond at some point before the bond reaches its date of maturity. In other words, on the call ...

: the call price is usually either par value or a small fixed percentage over par value. The shares in a corporation may be issued

partly paid A partly paid share is a share in a company which has only partial been paid compared to the par value, with the understanding that as the company requires more funds, calls will be made from time to time to request more money until the shares are ...

, which renders the owner of those shares liability to the corporation for any calls on those shares up to the par value of the shares.

Currency

The term "at par" is also used when two currencies are exchanged at equal value (for instance, in 1964,

Trinidad and Tobago Trinidad and Tobago (, ), officially the Republic of Trinidad and Tobago, is the southernmost island country in the Caribbean. Consisting of the main islands Trinidad and Tobago, and numerous much smaller islands, it is situated south of ...

switched from the British West Indies dollar to the new

Trinidad and Tobago dollar The Trinidad and Tobago dollar (ISO 4217, currency code TTD) is the currency of Trinidad and Tobago. It is normally abbreviated with the dollar sign $, or alternatively TT$ to distinguish it from other dollar-denominated currencies. It is subdiv ...

, and that switch was "at par", meaning that the Central Bank of Trinidad and Tobago replaced each old dollar with a new one). Par value also refers to the official gold content of a currency. The Act to Amend the Par Value Modification Act of 1973 of September 21, 1973 lowered the par value of the dollar against gold from $35 to $42.2222 where it remains today. This is why the face value of a 1 oz gold coin is $50, reflecting the par value of the dollar in gold.

References

{{DEFAULTSORT:Par Value Valuation (finance) Bond valuation

Bonds

Stock

Currency

See also

References