The CPA In Industry : Corporate Share Buybacks
- Topics:
- Decision Analysis
- Tags:
- Accounting,
- Stock,
- Payroll Solutions,
- Operational Accounting,
- Investment,
- Industry,
- Financial Planning,
- Finance,
- Certified Public Accountant,
- Buyback,
- ...
- Source:
- The CPA Journal
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Overview: In an era of abundant IPOs and stock placements, corporations also are announcing record buybacks of their outstanding shares. Repurchases serve a variety of purposes, from increasing earnings per share to providing stock for employee benefit plans. Although buybacks can be a sound part of a publicly held corporation’s financial strategy, they are complex endeavors that involve SEC rules, proper accounting and disclosure under GAAP, and certain federal income tax implications. A corporation recognizes taxable gain if it buys back its own shares (perhaps in a block purchase) with appreciated noncash property such as real estate, equipment, or the securities of other companies. Previous transactions or choices of accounting methods can affect the financial treatment of stock buyback programs or even eliminate them altogether. Some companies have avoided buybacks and even rescinded repurchase programs. One factor that increases a corporation’s vulnerability to SAB 96 is that the SEC staff views the “formulation of an intention” to repurchase stock, as the action that eliminates pooling of interests.
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Format: HTML | Date: Aug 2000 | Pages: 1
