## 1.32 Recording of share buybacks

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**Canonical URL:** [1.32 Recording of share buybacks](https://www.imf.org/-/media/files/data/statistics/gfsm/global-consultations/group3/proposed-recommendations-gfsm-2014-update-132-recording-of-share-buybacks.pdf)

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### Summary of proposed recommendation
- Update GFSM 2014 by clarifying that share buybacks are treated as purely financial transactions, aligning with the draft 2025 SNA and BPM7.
- No imputation of a distribution of dividends with a reinvestment of these dividends will be recorded.
- The decision not to implement the imputation approach follows SNA Action Point B.2 and the March 2023 AEG meeting.

### Consultations and discussions
- Global Consultation(s): BP Consultations: June 2021; SNA Consultations: November 2021.
- Discussions at the Advisory Expert Group on National Accounts (AEG): March 2023.
- Discussions at the Balance of Payments Committee (BOPCOM): June 2021.
- Discussions at GFSAC Meeting(s): To be determined.

### Background and issues
- Share buybacks occur when companies repurchase their own shares on the market and may serve several purposes, including returning capital to shareholders as a substitute for, or addition to, regular dividend payments or distribution of profits accumulated in the past.
- Annex 1 of Guidance Note (GN) F.2 on Asymmetric Treatment of Reinvested Earnings questioned the appropriateness of the current recording of share buybacks, a concern heightened by an increasing tendency to use buyback programs instead of distributing profits as dividends.
- GFSM 2014 and 2008 SNA do not provide explicit guidance on buyback programs; one may assume current recording treats buybacks as purely financial transactions: the disposal of shares by the holders, with a counterparty transaction liquidating share liabilities in the books of the company.
- Annex 1 of GN F.2 proposed an alternative recording: imputing a distribution of dividends with a transaction in equity as its counterpart, similar to reinvested earnings for foreign direct investment enterprises. This imputation would be additional to the financial transaction between the company and the shareholder selling the shares.
- GN F.2 noted potential problems with the imputation approach, including incentives for manipulating primary income (for example, governments reselling shares to the company during its buyback program to generate revenue). The theoretical and practical implications (including that imputed dividends related to share buybacks be “super dividend” tested) required further investigation.
- Recommendations to Resolve Minor Action Points (B.2) recommended not to change the current recording (i.e., record buybacks as purely financial transactions without imputing a distribution of dividends). The draft 2025 SNA (para. 8.135) explicitly states share buybacks should not be treated as distribution of dividends, but as financial transactions.

### Proposed recommendation text
- Clarify the treatment of share buybacks (at market prices) as financial transactions, without recording an imputed distribution of dividends.

### Rationale
- Harmonize the updated GFSM with the 2025 SNA and BPM7, which is a key objective of the GFSM 2014 update process.
- Because the SNA recommendation does not change current recording (i.e., a purely financial transaction without imputed distribution of dividends and reinvestments), there will be no implication for the GFSM conceptual framework beyond making the guidance more explicit.

### Proposed text for GFSM update (reproduced from draft 2025 SNA)
- 8.135 Share buybacks are not treated as the distribution of dividends. They are recorded as financial transactions, in these cases the purchases of own shares by the relevant corporations. For the treatment of dividends under reverse transactions, see paragraph 8.125.
- 8.125 In the case the legal ownership of securities changes under a reverse transaction, the economic owner of securities continues recording the accrual of interest and dividends on the securities, including when the security is further on-sold to a third party. If the reverse transaction covers the period when interest and dividends are payable, and during that period the taker has on-sold the asset, then the security taker (borrower) is typically obliged to compensate the security provider (lender). In such cases, it is recommended to record positive credit in interest, or dividends, for the security lender, and negative credit in interest, or dividends, for the security borrower.

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_Source: https://www.imf.org/-/media/files/data/statistics/gfsm/global-consultations/group3/proposed-recommendations-gfsm-2014-update-132-recording-of-share-buybacks.pdf_