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Unformatted text preview: ally subtracted
from income to arrive at income
available to common
• When we assume conversion of
the preferred stock, those
dividends must be added back.
• Also remember there is no tax
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
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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.
- Spring '09