8/7/16 Flashcards
Contingent shares (that are dilutive) are included in the calculation of basic earnings per share (EPS) if (and as of the date) all conditions for issuance are met. T or F?
True.
In computing the weighted-average number of shares outstanding during the year, which midyear event must be treated as if it had occurred at the beginning of the year?
Declaration and distribution of stock dividend. It must be retroactively recognized and treated as if it had occurred at the beginning of the year. In addition, EPS for all prior periods presented must be adjusted as though the shares had been outstanding for the entire period presented.
Who is required to disclose earnings per share?
EPS disclosures are required for all companies with publicly traded common stock or potential common stock including:
-Stock options
-Stock warrants
-Convertible securities
-“Contingent stock” agreements
Also required by companies that have made a filing or are in the process of filing with a regulatory agency in preparation for a public sale of common stock (e.g. SEC).
How are contingently issuable ordinary shares treated under IFRS?
They are treated as outstanding and included int he calculation of diluted EPS only if the conditions are satisfied.
What is considered a contingent share?
Shares issuable for no cash consideration after the occurrence of the specified condition. Such as issuable upon achieving a specific net income target, issuance of a patent, the passage of a specific period of time.
When are convertible securities recognized when calculating EPS?
When they are dilutive.
Should cash flow per share or conversion of debt to equity be disclosed as supplemental information in the statement of cash flows?
Conversion of debt to equity - yes.
Cash flow per share - no.
What is the primary purpose of a statement of cash flows?
To provide relevant information about the cash receipts and cash disbursements of an enterprise during an accounting period.
