Treasury shares arise when a corporation reacquires its own previously issued common shares.A reason for reacquiring outstanding common stock is to use the treasury shares in various option arrangements.When holders of stock options, stock rights, stock warrants, and convertible securities exercise their options, firms usually receive

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When holders of stock options, stock rights, stock warrants, and convertible securities exercise their options, the firms usually receive less cash (or market value of other consideration) than the market value of the common stock at the time. This results in a reduction of the cost of the treasury shares on the books of the reacquiring corporation.

Treasury Shares Arise When a Corporation Reacquires Its Own Previously