Question
When a company repurchases its own shares and holds them as treasury stock, total shareholders' equity:
Scoring
- 40% Account naming / line matching
- 40% Amount correctness
- 20% Structure / section placement
IAS 32 — Financial Instruments: Presentation
Reacquired own shares are deducted from equity, never recognised as an asset, and no gain or loss goes through profit or loss on their purchase, sale or cancellation. Any difference on reissue is taken to equity.
Common mistakes
- Recognising a gain or loss in profit or loss when treasury shares are reissued.
- Presenting treasury shares as an investment asset.
- Recognising a dividend on shares held in treasury.