 Do firms follow GAAP when they record share repurchases?Monica Banyi and Dennis Caplan Advances in accounting, 2016, vol. 34, issue C, 41-54 Abstract: This paper examines U.S. firms' accounting for share repurchases and the accounting choice provided to Delaware-incorporated firms between the treasury and retirement methods. This accounting choice does not affect income, cash flows, or net assets, but it nevertheless affects financial reporting transparency and the allocation of equity between retained earnings and contributed capital. According to Generally Accepted Accounting Principles (GAAP), the accounting choice to record share repurchases should reflect management's intended disposition of the repurchased shares. We compare characteristics of Delaware-incorporated treasury and retirement firms and find that the choice between the two accounting methods is not always consistent with GAAP, but neither is it random; rather, this choice is related to a number of firm characteristics including firm growth, industry membership, trading exchange, and price–earnings ratio. We also find that a firm's accounting method for share repurchases is associated with a firm's propensity to make future share repurchases. Keywords: Share repurchases; Treasury stock; Accounting choice (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:advacc:v:34:y:2016:i:c:p:41-54 DOI: 10.1016/j.adiac.2016.07.005 Access Statistics for this article Advances in accounting is currently edited by Dennis Caplan More articles in Advances in accounting from Elsevier |
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