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Chapter 16: Q1IFRS (page 895)

Where can authoritative IFRS be found related to dilutive securities, stock-based compensation, and earnings per share?

Short Answer

Expert verified

The official IFRS exhortation on financial instruments particularly on dilutive securities, are found in the US International Accounting Standards 39. For earnings per share, the IAS33 can be referred.

Step by step solution

01

Introduction to EPS

An EPS is utilized to ascertain the worth of a company's outstanding shares. Since the degree of benefit delivered by firms and the number of shareholders they have listed on exchanges might change, an EPS gives a for per-capita method of analyzing each organization.

02

US International Accounting Standards 39

The Recognition and Measurement was an international accounting standard, which illustrated the prerequisites for the acknowledgment and the estimation of the recognitions and measurements of financial assets, financial liabilities, and some contracts to trade non-financial items.

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Most popular questions from this chapter

Explain how convertible securities are determined to be potentially dilutive common shares and how those convertible securities that are not considered to be potentially dilutive common shares enter into the determination of earnings per share data.

All of the following are key similarities between GAAP and IFRS with respect to accounting for dilutive securities and EPS except:

(a) the model for recognizing stock-based compensation.

(b) the calculation of basic and diluted EPS.

(c) the accounting for convertible debt.

(d) the accounting for modifications of share options, when the value increases.

EPS: Simple Capital Structure) On January 1, 2018, Wilke Corp. had 480,000 shares of common stock outstanding. During 2018, it had the following transactions that affected the common stock account.

February 1 Issued 120,000 shares

March 1 Issued a 10% stock dividend

May 1 Acquired 100,000 shares of treasury stock

June 1 Issued a 3-for-1 stock split

October 1 Reissued 60,000 shares of treasury stock

Instructions

(a) Determine the weighted-average number of shares outstanding as of December 31, 2018.

(b) Assume that Wilke Corp. earned net income of \(3,456,000 during 2018. In addition, it had 100,000 shares of 9%, \)100 par nonconvertible, noncumulative preferred stock outstanding for the entire year. Because of liquidity considerations, however, the company did not declare and pay a preferred dividend in 2018. Compute earnings per share for 2018, using the weighted-average number of shares determined in part (a).

(c) Assume the same facts as in part (b), except that the preferred stock was cumulative. Compute earnings per share for 2018.

(d) Assume the same facts as in part (b), except that net income included a loss from discontinued operations of $432,000 (net of tax). Compute earnings per share for 2018.

Explain the treasury-stock method as it applies to options and warrants in computing dilutive earnings per share data.

Pechstein Corporation issued 2,000 shares of \(10 par value common stock upon conversion of 1,000 shares of \)50 par value preferred stock. The preferred stock was originally issued at \(60 per share. The common stock is trading at \)26 per share at the time of conversion. Record the conversion of the preferred stock
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