FAR 8

Question 1

What entities should report Earnings per share ?

Answer 1

All public entities has to report EPS on the face of the income statement

Question 2

Where to report Earnings Per Share ?

Answer 2

Normal EPS ( Basic + diluted ) has to be on the face of the income statement

EPS for discontinued operations = either on the face or in the notes of the financial statements

Question 3

How to calculate Basic EPS ?

Answer 3

Net income available to common shareholders / Weighted average common shares outstanding

Question 4

how to treat Stock dividends and stock splits ?

Answer 4

retrospectively ( ANYTHING HAPPENED BEFORE THE STOCK DIVIDENDS OR SPLIT TO BE TREATED AS IF IT HAPPENED IN THE BEGINING OF THE PERIOD )

Question 5

Calculate diluted EPS

Answer 5

Options , warrants = treasury stock method ( pretend like the proceeds from the issuance will be used to buy as much shares as it could at the average market price. ( no good news only the denominator goes up )

Convertible bonds = if converted method = good news + bad news

Saved interest X (1-Tax rate ) > Add to net income