Earnings Per Share (Portfolio 5137)

  • Earnings Per Share discusses the calculation, presentation, and disclosure requirements of Earnings Per Share under U.S. GAAP.


Bloomberg Tax Portfolio 5137, Earnings Per Share (Accounting Policy and Practice Series), discusses the calculation, presentation and disclosure requirements of Earnings Per Share under U.S. GAAP. Interim reporting requirements and differences with International Financial Reporting Standards reporting requirements also are examined.

All entities that have issued publicly traded common stock or potential common stock, including options, warrants, convertible securities, or contingent stock agreements, must include Earnings Per Share information in their financial statements. In fact, entities must present this information even if they are only in process of filing with a regulatory agency in preparation for the sale of securities in a public market. If an entity that is not required to present Earnings Per Share chooses to do so, it must present the information in accordance with the provisions presented in this Portfolio.

Earnings Per Share is a performance measure. The manner in which an entity computes Earnings Per Share depends on whether the entity has outstanding any potentially dilutive securities (including options, warrants, convertible securities and contingent stock agreements). For entities with no potentially dilutive securities, the measure is computed by dividing income available to common stockholders (the numerator) by the weighted-average number of common shares outstanding (the denominator) during the relevant period. Entities that have issued potentially dilutive securities must present an EPS measure that includes the effects of these securities. Thus, the denominator is increased to include the additional shares that would have been outstanding if the dilutive potential common shares had been issued. When computing the dilutive effect of convertible securities, the numerator is adjusted to add back convertible preferred dividends and the after-tax amount of convertible debt interest for the period. Other adjustments also may be necessary; this Portfolio details the requirements.

This Portfolio may be cited as Bloomberg Tax Portfolio No. 5137, McEwen, Earnings Per Share (Accounting Policy and Practices Series).  

Note: Various FASB documents, copyright by the Financial Accounting Standards Board, 401 Merritt 7, P.O. Box 5116, Norwalk, CT 06856-5116, U.S.A., are reprinted with permission.

Table of Contents

I. Historical Background and Objectives of the Portfolio
II. Basis for Earnings Measurement
III. The Statement of Earnings and Comprehensive Income
IV. Calculation of Earnings Per Share (EPS)
V. Interim Financial Reporting and its Effects on Earnings Per Share
VI. Alternate Earnings Per Share Definitions
VII. International Aspects of Earnings Per Share: IAS 33 and International Convergence Efforts
VIII. Earnings Quality and Topics in Earnings Management

Ruth McEwen
Director, School of Accounting
Florida International University
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