                    OFFICE   OF THE   ATTORNEY     GENERAL   OF TEXAS
                                          AUSTIN
       GROVER SELLERS
*_:
       ATIORNEI Gs?al?AL




      Ymfarhbie Ernest Cuba
      county nttorn6y, Ll Paw         county
      Yl Yaw,      Texan

                                        Opiaioa sao. o-bebo
                                        lie: AMe88wnt   of 8har68
                                               of ,acrtloarl
                                                           bank abook.




      luoh ohwe    am requfred to br
      b y th e8hareholdere lt tlmlr *
      ,and toll falne.*




      net 6apitfAl6Q86t8 to WZ'iV6 at          th6 V&b8   beok   Of tb   Ihbal-08."
      WQ alated in 6 Tex. Jur. 340:
                     *It fk proper for tbw awewor   or the board
                to eoaeider a11 eAeaumt8 whlab trnd to aompow or
                8UgWnt'ti~ VkiUS Of th0 ItOOk in the h~t1ia8Or the
                lndlvldual rtookbolder, that is to ray, t&s capital.
                QUX-&Q, tmdiilded pWrlf8 and 611 other perlonal
                and mm1 property owned by the bank as a eorporation.'t
    gonorable Arnest Culnn, page 2



             It ie insoonneotion with thir method that your problem
    aris88r The inatitutlon     in question  has included nn item o?
    $265.376.23 as "Other Liabilitiesv in Its "'Reportof Conditions
    at the Close or Buelnew     on Lhmember 30, 19U.w     In another
    stateursntof oonditlon mailed to It8 depositors however, this
    item 18 inoluded within an aggregate figure of 4629,827.92, which
    is entitled, "Heservetv:Interest, Taxes, Contingenoies end Cther
    Liabilitie8.v The asse8sor is oontending that SuOh fund8 being
    vBe8ervea* are Oapltal fUnd8 in the hand8 ~0r the bank nnd should
    Ohwdore     be oonsidered as auginenting  the value of'the stook, The
    other oontentlon pursued by the bank 18 that the (225,976.2S por-
    tion Of tha #629,827.92    8hould not be treated a8 oapital fUnd8,
    but a8 aliabilitfe8*    for the rearon that the )265,376.23 Item
    ie made up 0r "renerve8m ror paynbsnt0r 8peOisl 80000ntsi nsmely,
    to pay intere8t on saving8 aooount8, oltr taxer, payroll ~texer,
    lntere8t on Oertirioater of depoalt, Federal DepoosltInmranoe
    Companyaa8essments, surety bonds, and old age a88i8tanoe taxem;
    and thut eaoh month there la plaoed in these aaoounts an amount
    that  ha8 aoorued in there different iem8.
             Your problem then lnvolveo the proper interpretation of
    a ballkingin8titUtiOn's rin6n0isl 8tetement as on aid in erriring
    nt thenttue value 0r it8 ahares. Neither will the Court8 disturb
    sn n88008ment fairly arrived at wr say this drpartment assume
    the role or sn interpreter 0r rlaanoial statirtio8. Value or
    looal bank etook, lika Value oi real estate, I8 arrived at by
    eoneideratioa of raots more eu8geptible of determination by loos1
    experta, those iamlliar with the Looal ploture and oapable of giv-
    ing proper weight to all availabl*,evidenae. The Legislature ha8
    thus vested sole discretion in Q:~~luationand equalization of values
    of property aubjeat to taxation in the local aasetwaor and board of
    equelieation~. ~hie department is justiried in offering advioe,
    however, where the railure to ooasider a given faot or the improper
    consideration given a raot may amount to arbitrary  action or the
    abuse or dlsoretlon.
            ue therefore advise you thnt reaognleed aooounting praatloe
    distinguishes surplus reserves suoh ae for additions, antioip:jted
    losses, bond sinking fmds, and the like from w-oalled “reserves”
    set up for contra asset aooounte, euah as accrued liabilities.
    while aaorued liability “reSerVe0” repreaent runds held by the
    bank not immediately payable, by their very nature as accrued




t
liabilities     or debts, little, if any, oonsideration oould be aooorded
euoh runas am elements tending to oompose or augment
                                                   ,      the value 0r
th, stook in tiie/ h,mds ot the stoakholder.      hw0~8,        ir the
raats are found 'to 'be am stated by the bank, the assessor and county
oom;nieslonerelcourts     should give appropriate ooneideration    to the
raot that the $283.376.23 portion of the so-called "reserve' fund
represents    definite accrued liabll1ties rather than capital funda,
eurplue or undivided prorita. The assessor      or the board of epualize-
tion may, of oourse, In ereroising their expert administrative Judg-
ment, oonalude that 813amount la escee8 0r that neoessary to meet
these liabilitiaa     haa been eet aside. Any 8uoh exoese should, of
oourse, be treated am eurplu8 or undivided prOrit8.
        It le beliaved      that the rationalization      suggested  in
thi8 opinion will serve to distinguish it ito3           o-pinionHo~~tJ072
to which you Invited     the attcmntlon or this departnmnt,.
opinion lnvo3ved a fund set up ror oontingencle8 r#brrr than
eoorued llabilitiee and the holding wa8 that such fund ~618
‘one of the feotors    to be taken    into  ooneideration     bl the
board of eQuell%atlon      in fixing  the value of the stook inr tax
purpoOee.w
        The principles met forth in thi8 opinion should answer
the supplemental question presented in the fifth paragraph of
your letter of September 28th. In the event they do not, how-
ever, kindly met rorth tts r80t8 upon whioh~~#&!hi&&tlon i8
based, a8 you have done the main question pzerrenS+d,and thi8
opinion will be eupplemsnted aooordingly.
                                                 Yours very truly
