What is the proper accounting for share buybacks

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Question - Hill Networks provides products and services related to remote access networking. The company has grown rapidly during its first 10 years of operation. This maturing industry segment has begun to slow its fast growth. In fact, this year revenues and profits are roughly the same as last year.

Two months before the close of the fiscal year, the Chief Financial Officer (CFO) and the Controller were strategizing their recommendations for an upcoming Board meeting.

The CFO intends to suggest a share buyback program. The Controller points out that the company President hopes to use company resources for international expansion.

The CFO acknowledges the wisdom of the expansion plan for future growth but states: "Right now, we need a quick fix for our EPS numbers." The Controller concurs: "Yes, our shareholders are accustomed to increases every year."

Required - What is the proper accounting for share buybacks in the calculations of EPS? How will a buyback of shares provide a "quick fix" for EPS? Include a reference to relevant FASB GAAP using proper citations.

Reference no: EM133157587

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