Treasury shares

Learning objectives

• Explain that treasury shares are deducted from equity and that no gain or loss is recognised on their purchase, sale, issue or cancellation.L1
• Account for the buy-back and subsequent resale of treasury shares.L2

Normative references

• IAS 32 §33Equity instruments reacquired by the entity (treasury shares) are deducted from equity; no gain or loss is recognised in profit or loss on the purchase, sale, issue or cancellation of those instruments, the consideration paid or received being recognised directly in equity; treasury shares may be acquired and held by the entity or by other members of the consolidated group. Para. 33A permits an election, instrument by instrument, for treasury shares held within certain funds or as underlying items of insurance contracts with direct participation features.

Original summaries of the paragraphs (reference register), never a quotation of the standard.

4 questions

• Orme SA has set up a share option plan for its employees. To cover the plan, it buys back 20,000 of its own shares on the market (case facts). What treatment applies to this repurchase of treasury shares?L2
• When an entity resells its own shares at a price higher than their repurchase cost, it recognises the difference as a gain in profit or loss for the year.L1
• Rhône SA had repurchased 5,000 of its own shares for a total cost of {treasury_share_cost}. It resells them on the market for proceeds of {sale_proceeds}. Case convention: the difference is recorded under the caption "share capital and share premium". Calculate the amount of the resale difference.L2
• Tilde SA buys back 6,000 of its own shares on the market for a total price of {price_paid}, paid in cash. Record the repurchase entry.L2