Accounting Question: Treasury Method
Hey guys, quick question for anyone who is well-versed in accounting:
With the Treasury Method, there are three considerations. 1)The cash proceeds from issuing new shares. 2)The non-expensed (non-vested) value of options. 3)The excess tax benefit.
Can anyone please explain the second consideration? Why am I buying back additional stock valued at the non-expensed value. I get this this helps curb dilution, but why do I need to do so if earnings were not affected because there was no expense???
Thanks!
What do you mean earnings were not affected because there was no expense? First, TSM is just an assumption and is by no means a strict code of process. By repurchasing shares, it brings the share count down from the increased outstanding shares number caused by the dilution from the additional shares being created from the exercised options. It does affect earnings in that sense, because the lower your shares outstanding, the higher your EPS. That's all there is to it
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