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FASB will converge with IASB on EPS calculations

  • FASB (old) Image

19 Jun 2003

At its 11 June 2003 meeting, the US Financial Accounting Standards Board agreed with the IASB decision to remove the issues of joint ventures, proportionate consolidation, and hyperinflationary economies from the scope of their convergence project.

The FASB also added issues relating to earnings per share to the project scope and decided the following:
  • For annual and year-to-date computation of diluted EPS, the dilutive effect of options and warrants should be reflected by applying the treasury stock method for the year-to-date period independently from any interim computation. Options and warrants will have a dilutive effect under the treasury stock method only when the average market price of the common stock for the year-to-date period exceeds the exercise price of the options and warrants. The IASB has adopted a similar year-to-date approach.
  • When an entity has issued a contract that may be settled either in shares or in cash at the entity's option, the entity should presume that the contract will be settled in shares if the effect is dilutive. That presumption may not be overcome, regardless of past practice or stated policy to the contrary. While the IASB Improvements ED had proposed that the presumption be rebuttable, the IASB decided at its February 2003 meeting that the presumption may not be overcome.

Correction list for hyphenation

These words serve as exceptions. Once entered, they are only hyphenated at the specified hyphenation points. Each word should be on a separate line.