Earnings per share
(APB Opinion No. 15)
Single presentation of earnings per common share on the face of the income statement.
Complex capital structure: all others. (Or, structures that contain potentially dilutive securities, such as convertible preferred stock, convertible bonds, warrants, rights, or options.)
Dual presentation required for complex capital structures:
Primary earnings per share (replaced by Basic earnings per share under FAS No. 128)
denominator: Weighted average number of:
a. Common stock
b. Common stock equivalents {not used under FAS No. 128}
Definition of common stock equivalents: What was the nature of a common stock equivalent under APB Opinion No. 15?
(once a common stock equivalent always a common stock equivalent!)
numerator: Income (adjusted for assumptions in the denominator)
Fully diluted earnings per share
denominator: weighted average number of:
a. Common stock
b. Common stock equivalents {b. And c. are treated the same under FAS No. 128}
c. Common stock potentials (all other potentially dilutive securities)
numerator: Income (adjusted for assumptions in the denominator)
dilutive vs anti-dilutive effect of common stock equivalents and common stock potentials (now called potential common stock under FAS No. 128)
Options, warrants and rights (under APB No. 15, were always common stock equivalents. Why?)
Treasury stock method
Limitations on the treasury stock method {no limitation under FAS No. 128}
stock dividends and stock splits--impact on eps calculations