Earnings Per Share: Diluted - Lesson 2
17.3 هزار بار بازدید -
9 سال پیش
-
In this video, Roger Philipp,
In this video, Roger Philipp, CPA, CGMA, expands upon the previous video, 16.02 - Earnings Per Share: Diluted - Lesson 1, by providing a concrete example of potentially dilutive securities, how they would be included in the diluted Earnings Per Share (EPS) and how they would affect the company’s net earnings theoretically available to common shareholders.
Convertible bonds are the dilutive security chosen for the example, and Roger explains how and why the affect both the numerator and the denominator of the EPS calculation. In the numerator, bond interest expense from the converted bonds must be added, net of tax, back into net income. The common shares from the bonds converted to common stock must be added to the denominator. The end result is dilutive EPS, and it is lower than basic EPS because the securities were dilutive.
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Video Transcript Sneak Peek:
Look in your notes, the If Converted method. The calculation of diluted EPS assumes anyone who could convert does so for it to come to the convertible preferred or convertible bonds. Starts with computations just discussed which is called basic. For convertible securities, the following adjustments are made. In the numerator, earnings are increased by dividends or after-tax interest that would not have been due if securities had been converted.
Dividends or after-tax interest, the denominator shares are increased by the additional number of common shares that would have been outstanding if they had been converted. The convertible preferred, assume they've been converted at the beginning of the period or at time of issuance whichever is later, no weighted is required.
Convertible bonds are the dilutive security chosen for the example, and Roger explains how and why the affect both the numerator and the denominator of the EPS calculation. In the numerator, bond interest expense from the converted bonds must be added, net of tax, back into net income. The common shares from the bonds converted to common stock must be added to the denominator. The end result is dilutive EPS, and it is lower than basic EPS because the securities were dilutive.
Connect with us:
Website: https://accounting.uworld.com/cpa-rev...
Blog: https://accounting.uworld.com/blog/cp...
Twitter: Twitter: UWorldRogerCPA
Facebook: Facebook: UWorldRogerCPAReview
Instagram: Instagram: uworldrogercpareview
Pinterest: Pinterest: uworldrogercpareview
LinkedIn: LinkedIn: uworld-roger-cpa-review
Are you accounting faculty looking for FREE CPA Exam resources in the classroom? Visit our Professor Resource Center: https://accounting.uworld.com/cpa-rev...
Video Transcript Sneak Peek:
Look in your notes, the If Converted method. The calculation of diluted EPS assumes anyone who could convert does so for it to come to the convertible preferred or convertible bonds. Starts with computations just discussed which is called basic. For convertible securities, the following adjustments are made. In the numerator, earnings are increased by dividends or after-tax interest that would not have been due if securities had been converted.
Dividends or after-tax interest, the denominator shares are increased by the additional number of common shares that would have been outstanding if they had been converted. The convertible preferred, assume they've been converted at the beginning of the period or at time of issuance whichever is later, no weighted is required.
9 سال پیش
در تاریخ 1394/04/11 منتشر شده
است.
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