Changes to the Companies Act 1985 allow listed companies, from December 2003, to purchase their own shares and hold them in treasury without cancelling them. Abstract 37 addresses the accounting for treasury shares and, in consolidated financial statements, shares of the holding company held by subsidiaries. The Abstract requires a company’s holdings of its own shares to be accounted for as a deduction in arriving at shareholders’ funds, rather than to be recorded as assets. Purchases and sales of own shares should be shown as changes in shareholders’ funds. Profits or losses should not be recognised in respect of dealings in a company’s own shares.

This Abstract is superseded by FRS 25 (IAS 32) 'Financial Instruments: Disclosure and Presentation'.