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Indian GAAP

US GAAP

1

Purchasing a company's own equity shares is commonly known as a share buyback

Acquiring a company's own equity shares is often termed as treasury stock

2

Shares that are bought back by the company must be promptly cancelled.

Treasury stock can either be sold or cancelled, either immediately or at a later time

3

It must not exceed 25% of the total paid-up capital and free reserves.

The total number of treasury shares held by the company is capped at 10% of the total number of ordinary shares issued.

4

The ratio of debt owed by the company after buyback shall not be more than two times of the total of paid up capital and free reserves

There is no such ratio restriction

5

Equity Capital is extinguished to the extent of bought back immediately

It is not cancelled and thereby the same shall stand deducted from equity

6

As the bought back is cancelled immediately there is no specific method of valuation/reporting in the financial statement

There are two methods of accounting of treasury stock in US GAAP. A) Cost method B) Par Value method

Under Cost method, Treasury Stock is deducted at the cost of purchases.

Under Par Value method, Treasury stock shall stand deducted at Par value from equity capital and the balance more than par value shall be deducted from Additional Paid in Capital (ie Security Premium)