Earnings per share
Earnings per share Similarities Entities whose common shares are publicly traded, or that are in the process of issuing such shares in the public markets, must disclose substantially the same earnings per share (EPS) information under ASC 260 and IAS 33 (both titled Earnings Per Share). Both standards require the presentation of basic
and diluted EPS on the face of the income statement, and both use the treasury stock method for determining the effects of stock options and warrants in the diluted EPS calculation. Although both US GAAP and IFRS use similar methods of calculating EPS, there are a few detailed application differences.
Significant differences US GAAP
IFRS
Contracts that may be settled in shares or cash at the issuer’s option
Such contracts are presumed to be settled in shares unless evidence is provided to the contrary (i.e., the issuer’s intent or stated policy is to settle in cash).
Such contracts are always assumed to be settled in shares.
Computation of year-to-date and annual diluted EPS for options and warrants (using the treasury stock method) and for contingently issuable shares
For year-to-date and annual computations when each period is profitable, the number of incremental shares added to the denominator is the weighted average of the incremental shares that were added to the denominator in each of the quarterly computations.
Regardless of whether the period is profitable, the number of incremental shares is computed as if the entire year-to-date period were ―the period‖ (that is, do not average the current quarter with each of the prior quarters).
Treatment of contingently convertible debt
Potentially issuable shares are included in diluted EPS using the ―if-converted‖ method if one or more contingencies relate to a market price trigger (e.g., the entity’s share price), even if the market price trigger is not satisfied at the end of the reporting period.
Potentially issuable shares are considered ―contingently issuable‖ and are included in diluted EPS using the if-converted method only if the contingencies are satisfied at the end of the reporting period.
Convergence The Boards previously began a short-term convergence project on earnings per share, but now consider the project a lower priority and do not expect further action in the near term.
US GAAP versus IFRS The basics
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