17-EPS - Chapter 17 EarningsPerShare EarningsPerShare...

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    Chapter 17 Chapter 17         Earnings Per Share Earnings Per Share
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2 Earnings Per Share Earnings Per Share Overview Objective of EPS Presentation and Disclosure Diluted EPS Complex capital structure Convertible securities •Options and warranties Contingently issuable shares Anti-dilution revisited •Additional disclosures •Comprehensive earnings per share exercise Basic EPS Simple capital structure •Income available to common/ordinary shareholders Mandatory convertible instruments Contingently issuable shares Weighted average common/ordinary shares •Comprehensive illustration IFRS and Private Enterprise GAAP Comparison •Usefulness of EPS •Comparison of IFRS and private enterprise GAAP •Looking ahead
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3 Importance of EPS Importance of EPS Earnings per share is one of the most highly visible standards of measurement for assessing: management stewardship and predicting a company’s future value GAAP is very specific in regard to its calculation EPS is calculated for common shares
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4 Importance of EPS Importance of EPS Earnings per share tells common shareholders how much of the available income is associated with the shares they own (their share of the pie) Provides insight to common shareholders about: Future dividend payout The value of their shareholdings Impact of other financial instruments on their potential earnings (Diluted EPS)
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5 EPS Calculation EPS Calculation Basic EPS Actual earnings and actual number of issued common shares Diluted EPS Earnings and number of common shares adjusted for “ what-if What would the EPS be if any financial instruments that could be converted to common shares were actually converted
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6 EPS Calculation EPS Calculation Income available to common shareholders EPS = Weighted average number of common shares
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7 EPS Disclosure EPS Disclosure EPS must be reported as part of the income statement Exception: non public (privately held) corporations Reported for each income component as reported on the income statement EPS relating to discontinued operations (if applicable) may be presented on face of income statement, or disclosed in notes Where applicable, both Basic EPS and Diluted EPS reported Presented for all periods reported Prior period EPS restated for any stock dividends or stock splits
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8 EPS Disclosure EPS Disclosure If diluted EPS data are reported for at least one period, they should be reported for all periods that are presented, even if they are the same as basic EPS When the results of operations of a prior period have been restated as a result of a prior period adjustment, the EPS should also be restated The effect of the restatement should then be disclosed in the year of the restatement
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SoSew Corporation Income Statement For Year Ended December 31, 2011 Net sales …………………………………………………. $8,030,000 Cost of goods sold………………………………………..
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