To have enough stock available to offer stock options to high-value employees.
When should a company buy back stock?
A company should ideally buy back stock when it thinks its shares are underpriced. This benefits their shareholders. However, if the shares are overpriced, the company harms its shareholders by buying back shares.
How is treasury stock accounted for?
Treasury stock is not an asset. Instead, it’s listed on the balance sheet as a negative number under shareholders’ equity. It’s normally called either “treasury stock” or “equity reduction.” At present, treasury stock is carried at historical cost, though some accountants think it should be listed at the current market value of the shares.
Treasury stock refers to the shares of a company that the company retains. These shares may be shares that were never offered to the public or shares that the company reacquired from shareholders. Treasury stock is useful for a variety of reasons, such as avoiding a hostile takeover or to drive up the share price.