Flashcards in F7: EPS Deck (19)
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1
For US GAAP & IFRS, who is required to present EPS on the face of the IS?
ALL public entities
2
Simple capital structure
-Entity only has common stock outstanding
(no convertible)
3
What a simple capital structure entity presents
Basic EPS
4
Complex capital structure
-Entity has a discontinued operation or an extraordinary item
5
What a complex capital structure entity presents
-Basic AND Diluted EPS
6
Basic EPS formula
Income available to common shareholders (aka NI- PD)
Divided by:
WACSO
7
What all to include in the Preferred Dividends part of the Basic EPS formula
-Dividends declared for non-cumulative PS
-Accumulated dividends on cumulative PS
8
WACSO calculation
Shares outstanding at beginning of period
+ Shares sold during the period (time weighted)
- Shares acquired during the period (time weighted)
+ Stock dividends and splits (retroactively adjusted)
- Reverse stock splits (retroactively adjusted)
= WACSO
9
How to treat stock dividends and splits in weighted average formula
-Treat as though they occurred at the beginning of the period (retroactively)
10
4 Other items that would make a capital structure complex (any one of these)
1- convertible securities
2- warrants/options
3- contracts that may be settled in cash/stock
4- contingent shares
11
Diluted EPS formula
Basic EPS numerator plus interest on dilutive shares
Divided by
WACSO, assuming all dilutive securities are converted into common stock
12
Effect on numerator and denominator of diluted EPS formula: for Dilution from options and warrants
-no change to numerator
- increase to denominator
13
Method used to account for dilution from options and warrants:
Treasury stock method
14
Options are dilutive if:
average market price > strike/exercise price
15
Treasury stock method calculation
Number of shares issued - [(number of shares X exercise price)/ average market price] = additional shares outstanding
-Add this number to WACSO
16
Effect on numerator and denominator of diluted EPS formula: for dilution from convertible securities
-Changes both the numerator and denominator
17
Method used to account for dilution from convertible securities:
If-converted method
18
What to add to the diluted EPS formula for dilution of convertible securities
-Add to the numerator: IE x (1-T)
-Add to the denominator: # of CS shares associated with the assumed conversion
19
