What’s the accounting treatment for share buybacks?

[niyati]

When a company buys back its own shares, how is it recorded in the books? Also, how does a share buyback impact shareholder equity and overall valuation?

 

[riya]

Share buybacks are treated as a decrease in the shareholders equity in accounting. The expense of a company buying back its own stock is charged against cash and it is recorded as treasury stock or a reduce in capital. Buybacks have no effect in the income statement but they work on the equity and earnings per share.

 

[Rick_Grimes]

When a company buys back its own shares, the cost is recorded as a deduction from equity (under “treasury stock” or “share capital & reserves”), not as an expense. The shares can later be reissued or canceled — if canceled, the share capital is reduced by the nominal value, and any extra paid is adjusted against reserves.

 

[Mayank]

The accounting treatment for share buybacks involves reducing the company’s cash and shareholders’ equity. Treasury shares are recorded at cost, and any difference between buyback price and nominal value is adjusted against share premium or retained earnings.

 

[deepak]

The treatment under the accounting of the share buybacks includes the recording of the repurchased shares as a treasury stock under equity, and decreases the total shareholders equity. The shares are purchased at cost and neither a gain nor loss is realized on its purchase or resale. There is a decrease in cash and retained earnings could go down in case the reissued value is less than the original cost.

 

[robertwilliam]

The purchase by a corporation of some of its stock results in accounting records that reduce equity accounts and establish a liability for the cash savings.