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14.2 Analyze and Record Transactions for the Issuance and Repurchase of Stock

Stock Issuance​

At Par Value:

  • Issue price = Par value
  • Record at par value

Above Par Value:

  • Issue price > Par value
  • Par value to Share Capital
  • Excess to Share Premium

Example:

  • Issue 1,000 shares, par value €1, issue price €10
  • Par value: €1,000
  • Premium: €9,000

Journal Entry:

510000 Cash                       €10,000
101000 Share Capital                          €1,000
110000 Share Premium                           €9,000
To record share issuance above par

PCN Accounts:

  • 101000: Share Capital
  • 110000: Share Premium (Prime d'Émission)

Stock Repurchase​

Treasury Stock:

  • Company buys back its own shares
  • Reduces outstanding shares
  • Recorded as contra-equity

Example:

  • Repurchase 100 shares at €12 per share

Journal Entry:

129000 Treasury Stock             €1,200
510000 Cash                                   €1,200
To record share repurchase

PCN Account:

  • 129000: Treasury Stock (Actions Propres)

Luxembourg Compliance Note​

Stock transactions in Luxembourg:

  • Must comply with corporate law
  • Must use proper PCN accounts
  • Must maintain records
  • Must file with RCS
  • Must follow form-specific rules

Think It Through​

Why might a company repurchase its own shares? How does this affect equity?