Is there a gain or loss when I reissue treasury shares above cost?

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AcadiFi · Accepted Answer

No — gains and losses on treasury share transactions never hit the income statement under US GAAP or IFRS. They flow through equity. Using the cost method (most common): debit cash for proceeds, credit treasury stock for original cost, and plug the difference to additional paid-in capital (APIC). Example: Larkspur Industries repurchased 10,000 shares at $40 = $400,000 treasury debit. Later reissues 6,000 shares at $55: Dr Cash $330,000, Cr Treasury stock $240,000 (6,000 × $40), Cr APIC-Treasury $90,000. If reissued below cost, first offset any existing APIC-Treasury credit balance, then reduce retained earnings once APIC-Treasury is exhausted — never hit the P&L. Under the par value method the mechanics differ but the same no-P&L rule applies. CFA candidates often fall for the distractor that books a $15/share 'gain.' The logic: a company can't profit from trading its own equity. This also explains why aggressive buyback-and-reissue programs don't inflate earnings — but they do inflate EPS by shrinking the denominator and can boost APIC.

Is there a gain or loss when I reissue treasury shares above cost?

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