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.