Flashcards in F7: EPS Deck (19)

Loading flashcards...

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