capital transaction

Equity1

1. 505-30Treasury Stock505 Equity

   ASC 505-30 governs how an entity accounts for repurchases of its own outstanding common stock (treasury stock) and the later constructive or actual retirement or resale of those shares. The core rule is that treasury stock transactions are capital transactions: no gain or loss may be recognized in income or charged directly to retained earnings as profit, and differences between repurchase and resale/par amounts are allocated among additional paid-in capital and retained earnings. When shares are bought at a price differing from open-market price (e.g., from a specific shareholder), only the fair value of the shares is treasury stock cost and the excess is allocated to the other rights or privileges obtained and accounted for by their substance.