Chap 16 - EPS

Dividends also remember there is no tax also effect

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Unformatted text preview: ally subtracted from income to arrive at income available to common shareholders. shareholders. • When we assume conversion of When the preferred stock, those dividends must be added back. dividends • Also remember there is no tax Also effect associated with dividends. effect RELEVANT FACTS A significant difference between IFRS and GAAP is the accounting for securities with characteristics of debt and equity, such as convertible debt. Under GAAP, all of the proceeds of convertible debt are recorded as long-term debt. Under IFRS, convertible bonds are “bifurcated”—separated into the equity component (the value of the conversion option) of the bond issue and the debt component. Both IFRS and GAAP follow the same model for recognizing stockbased compensation: The fair value of shares and options awarded to employees is recognized over the period to which the employees ’ services relate. RELEVANT FACTS Related to employee share-purchase plans, under IFRS all employee share-purchase plans are deemed to be compensatory; that is, compensation expense is recorded for the amount of the discount. Under GAAP, these plans are often considered noncompensatory and therefore no compensation is recorded. Certain conditions must exist before a plan can be considered noncompensatory—the most important being that the discount generally cannot exceed 5%. Modification of a share option results in the recognition of any incremental fair value under both IFRS and GAAP. However, if the modification leads to a reduction, IFRS does not permit the reduction but GAAP does. RELEVANT FACTS Although the calculation of basic and diluted earnings per share is similar between IFRS and GAAP, the Boards are working to resolve the few minor differences in EPS reporting. One proposal in the FASB project concerns contracts that can be settled in either cash or s...
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This note was uploaded on 04/02/2014 for the course MGA 302 taught by Professor Ampadu during the Spring '09 term at SUNY Buffalo.

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