What is Share Buyback Accounting?
Share buyback accounting addresses the financial reporting of a company’s repurchase of its own shares. Under IFRS, the buyback reduces equity by the purchase price, and any direct transaction costs are also recognized in equity, not in profit or loss.
How It Works
- Approve the buyback program with the board and, if required, shareholders.
- Pay cash and reduce equity by the cost of repurchased shares.
- Hold as treasury shares or cancel the shares.
- Disclose the program, shares repurchased and average price.
Saudi Context
Saudi CMA buyback rules require Tadawul listed companies to announce buyback programs in advance and disclose execution on a daily basis once active.
Example
A SAR 100 million buyback executed at an average SAR 50 per share reduces equity by SAR 100 million and increases either treasury shares or reduces share capital depending on the approach.