Textbook Notes (363,559)
Canada (158,426)
MGAC02H3 (21)
Daga (10)
Chapter 17

Chapter 17 Notes

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University of Toronto Scarborough
Financial Accounting

Chapter 17 Earnings per Share NotesOverviewObjective of EPSy earnings per share disclosures help investors by indicating the amount of income that is earned by each common share y basic EPS looks at actual earnings and the actual number of common shares outstanding with this number prorated for the amount of time that the shares have been outstanding y diluted EPS is a what if calculation that takes into account the possibility that financial instruments such as convertible debt and options and others might have a negative impact on existing shareholder returns and therefore the shares value Presentation and Disclosure y PE GAAP for ASPE does not require EPS calculations or disclosures in the financial statements y this is because of costbenefit considerations as well as the fact that these entities may be closely held y the EPS number related to discontinued operations may be disclosed on the face of the statements or in the notes y IFRS requires the following 1 Earnings per share amounts must be shown for all periods that are presented 2 If there has been a stock dividend or stock split all per share amounts of prior period earnings should be restated using the new number of outstanding shares 3 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 4 When the results of operations of a prior period have been restated as a result of a prior period adjustment the corresponding earnings per share data should also be restated the restatements effect should then be disclosed in the year of the restatement Basic EPS Simple Capital Structure Capital Structure Major Types of Equity Instruments Impact on EPS Calculations Simple y Common residual voting shares y Need only calculate basic EPS y Preferred shares Complex y Common shares y Must calculate basic and diluted EPS y Potential commons shares o Convertible preferred shares o Convertible debt o Optionswarrants o Contingently issuable shares o Other Weighted Average CommonOrdinary Shares Stock Dividends Splits and Reverse Splits y when stock dividends or stock splits occur calculation of the weighted average number of shares requires a restatement of the shares outstanding before the sto
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