Treasury stock reporting and its possible abuse in the betterment of selected KPIs

The role of accounting is the key to successful financial planning and decision-making of companies. KPIs provide valuable insights into a business's economic health. This study's research subject is the treasury stock phenomenon and its classification from the perspective of global accounting standards and selected national accounting legislation (the Slovak one). They represent one of the problematic components in financial reporting. Applying Slovak Statutory Accounting, treasury stock is reported as a balance sheet item, concretely a short term financial asset, which may significantly impact liquidity ratios if the company has a significant repurchase of treasury stock. International financial reporting standards and US GAAP report them as a contra-equity account. Thereby, it impacts other ratios, e.g. EPS, etc. There is a dilemma: whether to record buy-back shares as an asset, whether they meet the definition of assets according to the Slovak legislation, or whether they prefer the international approach. The main objective of this study is to analyze treasury stock reporting according to Slovak legislation and IFRS and US GAAP and examine various scenarios that may come into existence because of accounting transactions with treasury stock. The paper aims to elaborate on the proposal for possible accounting treatment in Slovakia and other countries with similar treatment after a thorough critical analysis and comparison of the consequences of proposed treatments supported with justifying arguments. Regarding the study, the paper concludes by assessing the proposed accounting treatment model and justifies that the treasury stock reporting in Slovakia should be changed.