Business, Legal & Accounting Glossary
Treasury Stock is a US term for shares that have been repurchased by the issued company; thereby causing a reduction in the number of it’s shares on the open market.
A treasury stock is a stock issued by a public company at start-up or as a result of a stock repurchase program. Treasury stock are included in the company’s treasury which can be traded for cash if needed. Issuance of treasury stock is also a strategy used to retain control of the company in the event of a takeover. At any time, treasury stock can be retired or resold. Unlike the shareholder of a common stock or a preferred stock, the owner of a treasury stock does not have voting rights. Furthermore, a treasury stock does not pay out or accrue dividends. A treasury stock is not included as part of a company’s outstanding shares so the calculation of earning per share excludes treasury stock. Accounting for treasury stock can be done in two different ways. Treasury stock can be accounted for using the par value method (i.e. treasury stock is recorded at the par value of the stock reacquired) or the cost method (i.e treasury stock is recorded at the cost incurred by the company when repurchasing the shares). Treasury stock can also be referred to as treasury shares or reacquired stock.
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This glossary post was last updated: 5th February, 2020