Best think of this in debits and credits, served on a bed of taxpayers money, with a drizzle of financial alchemy.
[There is a bit of rounding in what follows so don't get hung up on 2+2 not being 4 all the time.]
From memory, this is my take on it:
All that has happened is that the capital structure, ie the Shareholders part of the balance sheet has been rejigged as to create a new heading of distributable reserves so as the y can be paid to the Gov as it is the largest shareholder.
The first double entry was to
Debit: Share capital and
Credit: Capital Redemption Reserves with 3.926 billion euro.
This came from dividing the nominal value of each ordinary share of 10 cents per share by 4 and as there are 521,300,000,000 odd shares in issue, this reduced the share capital from 5.21bill to 1.3 bill, being 1/4. The 3/4 was called deferred shares of 3.9 bill which was moved into the Capital Redemption reserve.
They then went to the High Court and asked to
Dr Capital Redemption reserve 3.9 bill
Cr Distributable Reserves 3.9 bill
This makes these funds now distributable by way of dividends.
For some reason that I don't know, they also sought the court approval to
Dr Share Premium Account 1.1 bill
Cr Distributable Reserves 1.1 bill.
Now there is 5 bill available for distribution.
The underlying docs are available on the AIB plc website