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We know that issued shares = outstanding shares + treasury shares. So issued shares must be greater than treasury shares by definition. However, Starbucks' fiscal 2014 From 10-K reports

"Common stock ($0.001 par value) — authorized, 1,200.0 shares; issued and outstanding, 749.5 and 753.2 shares, respectively,"

which clearly contradicts with the concept. What is happening here?

Bob Jansen
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Kun
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1 Answers1

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Your accounting identity: " issued shares = outstanding shares + treasury shares" is correct, however you are forgetting that treasury shares are registered with a negative sign on balance sheet. So that's why issued shares are lower than outstanding shares.

phdstudent
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    I still do not understand. How can the number of shares be negative? – Kun Dec 14 '15 at 16:07
  • They are not negative. It is just an accounting convention to register them with a negative sign. – phdstudent Dec 14 '15 at 17:12
  • If they are not negative, shouldn't issued shares be greater than outstanding shares since it includes treasury shares? – Kun Dec 14 '15 at 20:23
  • No. Issued shares should be lower than outstanding shares. As you said: issue shares = outstanding shares + treasury shares, and as I said treasury shares < 0 (by convention). – phdstudent Dec 14 '15 at 20:35
  • How can treasury shares be negative? we are adding shares whose number must be positive. Would you recommend some reading on this please? – Kun Dec 14 '15 at 20:49
  • Second result on a google search: "Treasury stock appears at cost or at par value in the shareholders equity section of the balance sheet and thus appears as a "negative" in the shareholders equity section (known as a contra equity account)." – phdstudent Dec 14 '15 at 21:29
  • I see that. But the problem is we are talking about the number of shares rather than the value of shares here I believe. – Kun Dec 14 '15 at 22:46
  • Even the number shows up as negative. It's a convention. – phdstudent Dec 15 '15 at 11:34
  • It is as a cost. However, we are talking about the number of shares rather than the accounting value of it. – Kun Dec 31 '15 at 02:08