Par Value

The par value of a bond is its face value and the basis on which coupon payments are calculated. A USD1,000 par value bond issued by a company represents a legal obligation to pay investors USD1,000 at maturity (plus stated interest). The par value of shares is a nominal amount set by an issuer but is not related to the value of those shares. The actual value of shares will be set according to a range of company-related and market factors and will be much higher than the par value. Companies that raise equity capital with par values assigned to each share will record the par value raised on the balance sheet but will add an additional line for the additional paid-in capital such that adding the two sums to the amount of equity capital raised.