Five percent of annual profit is allocated to the general legal reserve until it reaches twenty percent of paid-in capital, and further amounts may be required when dividends are distributed. These reserves may generally only be used for purposes set out in the law, such as offsetting losses.
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Related terms
Dividend policyThe policy, approved by the general assembly, setting whether a listed company distributes dividends and their rate, timing and form.Statement of changes in equityThe statement showing the changes in each component of equity during the period.Capital adjustment differencesThe amount arising from the inflation adjustment of paid-in capital, presented as a separate line within equity.Accounting estimatesThe determination by management judgement of amounts that cannot be measured precisely, such as provisions, useful lives, expected credit losses and fair values.Accounting policiesThe specific principles, bases, conventions, rules and practices an entity applies in preparing its financial statements.Accrual basis of accountingThe principle of recording transactions as income, expenses, assets and liabilities in the period in which they occur, rather than when cash is received or paid.
Last updated: November 8, 2026 · This definition is for general information only.