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Capital Redemption Reserve

How to account for moving shares from Capital Redemption Reserve back to ordinary A share capital

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I have a client and the company bought back £xxxx shares into the Capital Redemption Reserve  (in Treasury) back in 2017. They now want to transfer these shares to an exsisting shareholder.  I would have assumed you would credit the share capital and debit the Capital Redemption Reserve is this correct? The shares will be transferred at Nil consideration due to heavy losses in the last couple of years. 

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By johngroganjga
23rd May 2020 11:23

So do you mean that:

The company had a CRR on its balance sheet resulting from a previous repurchase and cancellation of different shares from the ones you are asking about?

The cost of purchase of the Treasury Shares you are asking about was debited to the CRR?

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By Simpleaccounts26
23rd May 2020 11:37

Hi
Thanks for relying.
Yes the company had a CRR on its BS resulting from the big back all the A shares from a retired shareholder and placed in treasury.
These same shares want to be transferred from the Company to an existing shareholder who hold b shares.
So am I correct in debiting the CRR and crediting the A shares with the value?

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Replying to Simpleaccounts26:
By johngroganjga
23rd May 2020 12:05

Then you will need to explain how a CRR results from a company purchasing its own shares and putting them in Treasury. Where did the company post the cost of purchasing the shares, and what was the other side of the entry creating the CRR?

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By Simpleaccounts26
23rd May 2020 12:24

The cost of the share purchase was funded through the distributable profits and the Statement of changes in equity Note was done showing the movement on the Share Capital and the CRR thus generating the reduction in share capital and increasing the CRR.
So I assume the accounting journal for the new share transfer would be
Dr CRR
Cr Ordinary A shares

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Replying to Simpleaccounts26:
By johngroganjga
23rd May 2020 12:29

So it was accounted for as a conventional company purchase of own shares, not as a Treasury purchase. What makes you think it was a Treasury purchase.

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By Simpleaccounts26
23rd May 2020 12:36

I wasn’t the accountant at the time another practice was and the current directors said they were treasury shares and this wasn’t accounted for in the accounts so we are amending the accounts to show the Shares in treasury.
These haven’t yet been sent in to Companies house.
So simply what’s the accounting difference to show a Company share buy back and a Company treasury buy back?

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Replying to Simpleaccounts26:
By johngroganjga
23rd May 2020 12:44

The key difference is that the shares bought back cease to exist. The reduction in share capital that occurred was consistent with that being the case.

Are you sure you aren’t re-writing history.

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Replying to johngroganjga:
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By Simpleaccounts26
23rd May 2020 12:53

The form SH03 was completed but never filed by the solicitor or previous accountant. The form clearly stated they were treasury.
So what is the accounting treatment for treasury shares and what disclosure is needed?
I appreciate your assistance with this.

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By johngroganjga
23rd May 2020 13:07

So what WAS filed at Companies House?

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By Simpleaccounts26
23rd May 2020 13:14

Only the accounts not showing any share adjustment.
The solicitor has just sent the SH03 to Companies House and we have been asked by our client to send amended accounts to reflect the share treasury buy back

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Replying to Simpleaccounts26:
By johngroganjga
23rd May 2020 13:34

But you said “note was done showing the movement on the Share Capital ...”.

Now you are saying the opposite!

The whole exercise seems pointless. If the company wants its share capital to revert to what it was before the transaction in question, let it just issue new shares. Why is all this rigmarole necessary? What purpose does it serve?

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