When a company repurchases outstanding common stock, where would the repurchase cost be recorded in the cash flow statement?
When a company repurchased or reacquires their own common stock, that represents a cash outflow. That stock would now be considered treasury stock since the company owns their own stock (reduces the equity owned by shareholders). Any purchase of treasury stock or subsequent reissuance would be recorded in the financing section of the cash flow statement as it is a form of equity financing (#3 in the visual below).
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What is reported in the financing section of the cash flow statement?
The financing section includes activities related to debt or equity activities. This would include issuing common stock, issuing preferred stock, treasury stock, dividend payments, issuing bonds, issuing notes, and payment of principal of debt.
What are the three sections of the cash flow statement?
The three sections are operating, inventing, and financing. The phrase “Oops I forgot” is helpful to remember the three section. The “O” in oops represents operating, the “I” represents investing, and the “f” in forgot represents financing. The operating section of the statement of cash flows will represent the cash inflows and outflows from operating […]