FAR - EPS

Question 1

When calculating the weighted average shares, how are stock splits and stock dividends treated?

Answer 1

they are applied retrospectively as if they have existed the full year. If they happened in year 4 and year 3 is shown then they need to be applied to year 3 (must be applied to all years shown)

Question 2

where does EPS need to be shown in financials

Answer 2

for a public company, EPS must be shown on the income statement. BEPS and DEPS must be shown with equal prominence (if DEPS is applicable)

Question 3

How to calculate convertible debt in EPS?

Answer 3

First need to determine whether it is dilutive or not. If dilutive, need to include the interest payment (net of tax in the numerator. And the total shares subject to conversion in the denominator.

Question 4

What are contingent shares and how to they impact EPS and DEPS?

Answer 4

Contingent shares are issued for no cash consideration after the occurrence of the specified condition. Examples, are shares issued upon issuance of a patent; shares issued upon achieving a specific net income target; and, shares issued upon the passage of a specific time

EPS - includes contingent shares if ALLconditions have been satisfied

DEPS - includes contingent shares in proportion to the conditions that have been met