A comprehensive guide Earnings per share EY Japan

A Comprehensive Guide Earnings Per Share Ey Japan-Free PDF

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To our clients and other friends, We are pleased to provide you with the latest edition of our Financial reporting developments FRD. publication on earnings per share, The Financial Accounting Standards Board FASB guidance on earnings per share is codified in. Accounting Standards Codification ASC 260 Earnings Per Share It has been amended a number of. times This guide is designed to provide detailed interpretative guidance on the rules related to the. calculation and disclosure of earnings per share, In June 2018 the FASB issued guidance1 to simplify the accounting for share based payments to. nonemployees by aligning it with the accounting for share based payments to employees with certain. exceptions The Accounting Standards Update ASU included consequential amendments to ASC 260 to. clarify that the provisions in ASC 260 will apply to share based awards issued to grantees i e employees. and nonemployees under a share based payment arrangement in exchange for goods and services This. edition of our publication reflects those consequential amendments and incorporates the guidance on. earnings per share that was previously included in our FRD Share based payment Refer to Appendix D. for a table highlighting the updates, EY professionals are prepared to help you understand and comply with this guidance and are ready to. address your concerns and questions,October 2018, ASU 2018 07 Compensation Stock Compensation Topic 718 Improvements to Nonemployee Share Based Payment Accounting.
1 Overview 1,1 1 Basic EPS 1,1 2 Diluted EPS 1, 1 3 Participating securities and the two class method 2. 1 4 Presentation and disclosure 2,2 Scope and scope exceptions 3. 2 1 Securities that are similar to common stock 3,3 Basic EPS 4. 3 1 Computation of basic EPS 4, 3 2 Income available to common stockholders and preferred dividends 5. 3 2 1 Effect on the calculation of EPS for a period that includes the redemption. or induced conversion of preferred stock 6, 3 2 2 Effect of redeemable securities on income available to common stockholders 8.
3 2 3 Effect of instruments with down round features on income available to. common stockholders after adoption of ASU 2017 11 15. 3 3 Weighted average shares outstanding 16,3 3 1 Computing a weighted average 16. 3 3 2 Treatment of contingently issuable shares in weighted average shares outstanding 17. 3 3 3 Business combinations and reorganizations 18. 4 Diluted EPS 19,4 1 Computation of diluted EPS 19. 4 2 Antidilution 21, 4 3 Options warrants and their equivalents and the treasury stock method. updated October 2018 25,4 3 1 Computing the average market price 28. 4 3 2 Applying the treasury stock method in annual and year to date computations 29. 4 4 Share based payment arrangements updated October 2018 31. 4 4 1 Share based payment awards the treasury stock method before adopting. ASU 2016 09 32, 4 4 1 1 Awards that vest based only on service conditions before adopting.
ASU 2016 09 34, 4 4 1 2 Computing the tax adjustment to assumed proceeds before adopting. ASU 2016 09 35, 4 4 1 3 Effect of forfeitures on diluted EPS before adopting. ASU 2016 09 37, 4 4 1 4 Example calculation of the dilutive effect of employee stock options. before adopting ASU 2016 09 38, 4 4 2 Share based payment awards the treasury stock method after adopting. ASU 2016 09 40, 4 4 2 1 Awards that vest based only on service conditions after adopting.
ASU 2016 09 43, Financial reporting developments Earnings per share i. 4 4 2 2 Effect of forfeitures on diluted EPS after adopting ASU 2016 09 43. 4 4 2 3 Example calculation of the dilutive effect of employee stock options. after adopting ASU 2016 09 45, 4 4 3 Awards that vest or become exercisable based on the achievement of. performance or market conditions 47, 4 5 Employee stock ownership plans and employee stock purchase plans 50. 4 5 1 Employee stock ownership plans 50,4 5 2 Employee stock purchase plans 52. 4 6 Convertible securities and the if converted method 53. 4 6 1 Variable conversion prices 55, 4 6 2 Applying the if converted method in annual and year to date computations 55.
4 6 3 Mandatorily convertible instruments 57,4 7 Contingently convertible instruments 58. 4 7 1 Contingency is not based on price of issuer s stock or the convertible instrument 58. 4 7 2 Contingency is based on the price of the issuer s stock or the convertible instrument 58. 4 8 Contingently issuable shares 61, 4 8 1 Contingencies based on earnings levels or market price of stock 65. 4 8 2 Contingencies involving multiple reporting periods 66. 4 8 3 Other contingency provisions and illustrations 67. 4 8 4 Contingently issuable potential common shares 68. 4 9 Contracts that may be settled in stock or cash updated October 2018 69. 4 9 1 Convertible debt with issuer option to settle for cash upon conversion 73. 4 9 2 Puts and calls on convertible debt that can be settled in stock or cash 75. 4 9 3 Share based payment awards that may be settled in stock or cash 76. 4 10 Written put options forward purchase contracts and the reverse treasury stock method 77. 4 11 Purchased options 79, 5 Participating securities and the two class method 80. 5 1 Overview 80, 5 2 Determining whether a security is a participating security 80. 5 2 1 Convertible instruments and option contracts 82. 5 2 2 Forward equity contracts 83,5 2 3 Accelerated share repurchase programs 83.
5 2 4 Unit structures 85,5 3 Application of the two class method 87. 5 3 1 Allocation of undistributed earnings to a participating security 89. 5 3 2 Allocation of undistributed losses under the two class method 92. 5 3 3 Diluted EPS under the two class method 93,5 3 3 1 Convertible participating securities 93. 5 3 3 2 Convertible participating class of common stock 95. 5 3 4 Equity restructurings 98,5 3 5 Discontinued operations 98. 5 3 6 Dividend equivalents paid on participating liability instruments 102. 5 3 6 1 Dividend equivalents paid on participating share based liabilities 102. 5 3 7 Quarterly and year to date calculations 102,5 3 8 Tracking stocks 102. Financial reporting developments Earnings per share ii. 5 4 Participating securities in the form of share based payments 103. 5 4 1 Share based payment allocation of earnings and losses before adopting. ASU 2016 09 104, 5 4 1 1 Share based payment allocation of earnings and losses after adopting.
ASU 2016 09 105, 5 4 2 Earnings per nonvested share based payment award 105. 5 4 3 Changes in forfeiture rates 106, 5 4 4 Illustrative example before adopting ASU 2016 09 106. 5 4 5 Illustrative example after adopting ASU 2016 09 109. 5 5 Master limited partnerships 113, 5 5 1 Determining whether an IDR is a participating security 114. 5 5 2 Allocation of earnings and losses 115,5 5 2 1 IDR is separately transferable 115. 5 5 2 2 IDR is not separately transferable 117, 5 5 2 3 Allocation of earnings and losses prior to a dropdown 119.
5 5 3 Determination of available cash 121,5 5 4 Year to date calculation 121. 5 5 5 Example EPS calculation for an MLP 121,6 Other matters 125. 6 1 Securities of subsidiaries 125, 6 2 Own share lending arrangements issued in contemplation of convertible debt. issuance or other financing 128, 6 3 Partially paid shares and partially paid stock subscriptions 129. 6 4 Rabbi trusts 130,6 5 Unit structures 131, 6 6 EPS computations in an initial public offering 132.
6 6 1 Nominal consideration 134,6 6 1 1 Definition of nominal 134. 6 6 1 2 Definition of consideration 135, 6 7 EPS for carve out of existing business or previously existing subsidiary 135. 6 8 Pro forma EPS 136, 6 8 1 Pro forma EPS reflecting the use of offering proceeds 136. 6 8 1 1 Offering proceeds used to pay dividends in excess of current year. earnings or total offering proceeds at or prior to closing of an IPO 137. 6 8 1 2 Offering proceeds used to extinguish debt 138. 6 8 2 Other circumstances resulting in pro forma EPS presentation 140. 6 8 2 1 Change in tax status in connection with an IPO 140. 6 8 2 2 Changes in capital structure 140, 6 8 3 Pro forma EPS presentation in SEC filings after IPO 140. 7 Presentation and disclosure 141,7 1 Presentation 141.
7 1 1 Interaction of discontinued operations and noncontrolling interests 142. 7 1 2 Non GAAP per share amounts 143,7 2 Disclosure 144. 7 2 1 General disclosures 144,7 2 2 Disclosure of the effects of ESOPs 148. Financial reporting developments Earnings per share iii. 7 2 3 Differences between net income and income available to common shareholders 148. 7 2 4 Exhibits 149,7 3 Restatement of EPS data 149. 7 3 1 Stock dividends or stock splits 149, 7 3 1 1 Accounting for distributions to shareholders with components of. stock and cash 150,7 3 2 Rights issues 151,7 3 3 Prior period adjustments 153.
A Glossary A 1,B Abbreviations used in this publication B 1. C Index of ASC references in this publication C 1,D Summary of important changes D 1. Financial reporting developments Earnings per share iv. Notice to readers, This publication includes excerpts from and references to the FASB Accounting Standards Codification. the Codification or ASC The Codification uses a hierarchy that includes Topics Subtopics Sections. and Paragraphs Each Topic includes an Overall Subtopic that generally includes pervasive guidance for. the topic and additional Subtopics as needed with incremental or unique guidance Each Subtopic. includes Sections that in turn include numbered Paragraphs Thus a Codification reference includes the. Topic XXX Subtopic YY Section ZZ and Paragraph PP, Throughout this publication references to guidance in the Codification are shown using these reference. numbers References are also made to certain pre Codification standards and specific sections or. paragraphs of pre Codification standards in situations in which the content being discussed is excluded. from the Codification, This publication has been carefully prepared but it necessarily contains information in summary form and.
is therefore intended for general guidance only it is not intended to be a substitute for detailed research. or the exercise of professional judgment The information presented in this publication should not be. construed as legal tax accounting or any other professional advice or service Ernst Young LLP can. accept no responsibility for loss occasioned to any person acting or refraining from action as a result of. any material in this publication You should consult with Ernst Young LLP or other professional. advisors familiar with your particular factual situation for advice concerning specific audit tax or other. matters before making any decisions, Portions of FASB publications reprinted with permission Copyright Financial Accounting Standards Board 401 Merritt 7 P O. Box 5116 Norwalk CT 06856 5116 USA Portions of AICPA Statements of Position Technical Practice Aids and other AICPA. publications reprinted with permission Copyright American Institute of Certified Public Accountants 1211 Avenue of the Americas. New York NY 10036 8775 USA Copies of complete documents are available from the FASB and the AICPA. Financial reporting developments Earnings per share v. 1 Overview,1 1 Basic EPS, Basic earnings per share EPS one of the two measures of EPS required to be disclosed by ASC 260 is. calculated by dividing income available to common stockholders i e net income or loss attributable to the. parent entity adjusted for preferred stock dividends declared or accumulated by the weighted average. number of common shares outstanding Options warrants unvested share based payment awards and. convertible securities are excluded from the basic EPS calculation Contingently issuable shares i e shares. issuable for little or no cash consideration upon the satisfaction of certain conditions are included in basic. EPS only if all the necessary conditions for the issuance of such shares have been satisfied by the end of the. period e g the issuance of shares is no longer contingent on any conditions except for the passage of time. 1 2 Diluted EPS, Diluted EPS is the second EPS measure required to be disclosed by ASC 260 In computing diluted EPS basic. EPS is adjusted for the assumed issuance of all potentially dilutive securities The dilutive effect of call. options warrants and share based payment awards is calculated using the treasury stock method which. assumes that the proceeds from the exercise of these instruments are used to purchase common shares at. the average market price for the period The dilutive effect of traditional convertible debt and preferred. stock is calculated using the if converted method Under the if converted method securities are assumed. to be converted at the beginning of the period and the resulting common shares are included in the. denominator of the diluted EPS calculation for the entire period being presented Interest including the. effect of accretion of discounts or amortization of premiums as well as amortization of debt issuance costs. net of any income tax effects and dividends on convertible securities are added back to the numerator for. purposes of the if converted calculation In addition the numerator is adjusted for the after tax effects of. any nondiscretionary adjustments based on income that would have been computed differently had interest. or dividends not been recognized such as expense resulting from profit sharing plans. Accounting Standards Codification ASC 260 Earnings Per Share It has been amended a number of times This guide is designed to provide detailed interpretative guidance on the rules related to the calculation and disclosure of earnings per share In June 2018 the FASB issued guidance1 to simplify the accounting for share based payments to

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