Difference between Capital Redemption Reserve and Other Reserves
Basis |
Capital Redemption Reserve(CRR) |
Other Reserves |
---|---|---|
Type |
CRR is a special type of reserve created to account for the redemption or buyback of a company’s own shares. | Other reserves are created for various purposes and may serve different functions within a company. |
Legal Requirement |
Company law mandates the company limited by shares to create CRR during the redemption of preference shares. | These may be created voluntarily or as required by specific regulations or accounting standards. |
Utilisation |
The amount of CRR can be used to issue fully paid bonus shares to the members of the company. It is not allowed to be distributed to the shareholders. | It can be utilized for various purposes, such as meeting contingencies, funding future projects, absorbing losses or can be distributed as a dividend. |
Disclosure |
Company law requires specific disclosure in the financial statements regarding the purpose and utilization of this reserve. | The disclosure of the reserves may vary based on its nature, but there is generally a requirement to provide transparency in financial reporting. |