Appropriated Retained Earnings Law and Legal Definition

Appropriated retained earnings means retained earnings that a company’s board assigns for a distinct use, and which reduces the amount available for dividends or for other uses. The company through appropriated retained earnings accumulates earnings for a particular purpose, or ascribes it to a restrictive covenant in a loan agreement. The appropriated retained earnings are usually used for plant expansion, sinking fund, improving infrastructure, R&D, marketing, or contingencies. They are not passed on immediately to shareholders in any form. Any amount of appropriated retained earnings that are not used for such purposes will be reversed back into dividend payments. It is also called as appropriated surplus, surplus revenue, or suspense reserve.