Simple Question on Treasury Stock?

[zebster]

Hey guys,

I'm new to the forums and was hoping someone could help me out.

I'm researching a question on treasury stock. The company has repurchased the company's common stock stock from a shareholder, paying the shareholder part in cash for the shares and the other part in a note payable issued to the shareholder (not a bank).

My question is, is this OK to do? Is a note payable an appropriate classification for this method? From my research, I would have to agree, because FASB nor the SEC has anything specific to support this type of transaction. Thus, my belief would be it is a generally accepted transaction and does not need specific support or code to back it up.

If you guys could give me some insight or let me know what you think, I'd really appreciate it! Thanks for these awesome forums! I learn a lot!

 

[kirby]

The stock repurchase will improve earnings per share. For that reason, your auditors will scrutinize the transaction. I can't find a similar example on this though. But keep in mind that when you ISSUE common stock you have to do this for cash not a promise to pay. Enron had a good example of that.So - in same way - looks to me like auditors would require the purchase to be settled in cash.