Definition of a Treasury Shares
What is a Treasury Share?
A company may hold its own equity instruments, often referred to as “treasury shares”. Such treasury shares may be acquired and held by the issuing enterprise itself or by its subsidiaries, depending on the jurisdiction.
Presentation of Treasury Shares on the financial statement
Treasury shares should be presented in the balance sheet as a deduction from equity. The acquisition of treasury shares should be presented in the financial statements as a change in equity.
IAS 32 paragraph 33 states that: If an entity reacquires its own equity instruments, those instruments (‘treasury shares’) shall be deducted from equity. No gain or loss shall be recognised in profit or loss on the purchase, sale, issue or cancellation of an entity’s own equity instruments. Such treasury shares may be acquired and held by the entity or by other members of the consolidated group. Consideration paid or received shall be recognised directly in equity.
As evidenced above, under International Financial Reporting Standard: no gain or loss should be recognised in the income statement on the sale, issuance, or cancellation of treasury shares. Consideration received should be presented in the financial statements as a change in equity.
The amounts of reductions to equity for treasury shares held should be disclosed separately either on the face of the balance sheet or in the notes.
In addition, an enterprise should provide disclosure, in accordance with IAS 24, if the enterprise or any of its subsidiaries re-acquires its own shares from parties able to control or exercise significant influence over the enterprise.