What is Treasury Shares?
Treasury shares are shares that a company has issued and later repurchased from the market, but has not cancelled. Under IFRS, treasury shares are deducted from equity at cost, and any subsequent gain or loss on resale is also recognized in equity, not in profit or loss.
How It Works
- Repurchase shares from the market or shareholders.
- Deduct the cost of repurchase from equity (treasury shares reserve).
- On resale, the difference between proceeds and cost goes to equity.
- Disclose number, cost and average price of treasury shares held.
Saudi Context
Saudi listed companies can hold up to 10 percent of their own shares as treasury under CMA rules, often for employee incentive plans or stabilization.
Example
A company repurchases 1 million shares at SAR 40 each. Equity is reduced by SAR 40 million via a treasury shares reserve.