Handbook Earnings per share KPMG

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Foreword 1,About this publication 2,1 Executive summary 4. 3 Basic EPS The foundations 23,4 Diluted EPS The foundations 60. 5 Participating securities and the two class method 101. 6 Consideration of specific instruments 150,7 Retrospective adjustments 317. 8 EPS in interim financial statements 352,9 Presentation disclosure and other matters 376. Appendices,Topic 260 Glossary 406,Select Topic 260 illustrations 413.
Index of Q As 430,Index of examples 439,KPMG Financial Reporting View 442. Acknowledgments 443, 2018 KPMG LLP a Delaware limited liability partnership and the U S member firm of the KPMG network of independent member. firms affiliated with KPMG International Cooperative a Swiss entity All rights reserved. Earnings per share 1,The complicated common,metric Earnings Per Share. EPS is a metric used by public companies investors and others to measure or. monitor a company s earnings and trends While certain public companies may. have their own industry related or company specific metrics EPS is a required. and therefore common metric amongst all public companies. Since the FASB released its initial guidance on EPS in 1997 now contained in. Topic 260 it has been largely untouched EPS calculations can be relatively. straightforward for simple capital structures But more complex instruments. such as those that contain conversion features or contingencies or share based. payment awards or more complex capital structures often create a trickier. EPS calculation In addition the EPS requirements around participating. securities can be challenging, This Handbook explains the principles of Topic 260 through Q As and. examples using a step by step approach to lead you through the calculations. and more complex instruments We have organized this Handbook to make it. easy to find the steps needed for the EPS calculation We also discuss many. instruments and scenarios that are not directly addressed in Topic 260. Kimber Bascom and Regina Croucher,Department of Professional Practice KPMG LLP.
2018 KPMG LLP a Delaware limited liability partnership and the U S member firm of the KPMG network of independent member. firms affiliated with KPMG International Cooperative a Swiss entity All rights reserved. Earnings per share 2,About this publication,About this publication. The purpose of this Handbook is to assist you in presenting and disclosing. earnings per share EPS information under the requirements in Topic 260 and. related SEC guidance,Organization of the text, Each chapter of this Handbook includes excerpts from the FASB s Accounting. Standards Codification and overviews of the relevant FASB requirements for. EPS information Our in depth guidance is explained through Q As that reflect. the questions we are encountering in practice We include observations and. examples to explain key concepts, Our commentary is referenced to the Codification SEC regulations and to other. literature where applicable The following are examples. 260 10 50 1 is paragraph 50 1 of ASC Subtopic 260 10. S X Rule 5 03 21 is paragraph 21 of Rule 5 03 of SEC Regulation S X. SEC FRM 7520 2 is Section 7520 2 of the SEC s Financial Reporting. 2014 AICPA Conf is the 2014 AICPA National Conference on Current SEC. and PCAOB Developments These references are hyperlinked to the source. material on the SEC s website, TQA 7100 03 is section 7100 03 of the AICPA s Technical Questions and. Pending content, Some paragraphs reproduced in this Handbook from Topic 260 were amended.
by the following Accounting Standards Updates, ASU 2017 11 Earnings Per Share Topic 260 Distinguishing Liabilities from. Equity Topic 480 Derivatives and Hedging Topic 815 Part I Accounting. for Certain Financial Instruments with Down Round Features. ASU 2018 07 Compensation Stock Compensation Topic 718. Improvements to Nonemployee Share Based Payment Accounting. Paragraphs amended by these ASUs are not labeled as pending content. because they are currently effective for public business entities An entity that. has not yet adopted the ASUs should consult the unamended Codification. paragraphs, 2018 KPMG LLP a Delaware limited liability partnership and the U S member firm of the KPMG network of independent member. firms affiliated with KPMG International Cooperative a Swiss entity All rights reserved. Earnings per share 3,About this publication,Abbreviations. We use the following abbreviations in this Handbook. EPIS Earnings per incremental share,EPS Earnings per share. EPU Earnings per unit,GP General partner,IDR Incentive distribution right.
LP Limited partner,MLP Master limited partnership,NCI Noncontrolling interest. PCS Potential common share,RSU Restricted stock unit. 2018 KPMG LLP a Delaware limited liability partnership and the U S member firm of the KPMG network of independent member. firms affiliated with KPMG International Cooperative a Swiss entity All rights reserved. Earnings per share 4,1 Executive summary,1 Executive summary. EPS is a performance measure indicating the amount of income during a. reporting period that is attributable to each common shares and potential. common share A potential common share is a security or other contract that. may entitle its holder to obtain common shares common stock. Topic 260 prescribes certain principles for determining and presenting EPS. There are two types of EPS information, Basic EPS is presented when an entity has common shares outstanding. Diluted EPS is presented when an entity has both common shares and. potential common shares outstanding that are dilutive. This Handbook explains the foundational principles for calculating EPS and the. numerous associated nuances, Topic 260 requires EPS information is required for common shares or.
presentation of EPS potential common shares when,information by. these shares trade are in a public market,entities that have. these shares will be part of a securities,issued common. shares or other offering in a public market and the entity is in. securities that are the process of making a filing to facilitate the. considered potential securities offering or,common shares the entity is an MLP. In addition an entity that is not required to present. EPS information but chooses to is required to, follow the presentation and disclosure guidance in.
Read more chapter 2, 2018 KPMG LLP a Delaware limited liability partnership and the U S member firm of the KPMG network of independent member. firms affiliated with KPMG International Cooperative a Swiss entity All rights reserved. Earnings per share 5,1 Executive summary,Basic EPS The foundations. Basic EPS indicates EPS is a ratio calculated as follows. the amount of income,numerator income available to common. from a reporting,shareholders,period that is,denominator weighted average number of. available to each,common share common shares outstanding during the.
reporting period,Determining the numerator requires adjustments. to income loss for returns on other classes of,equity instruments Determining the denominator. requires identifying which shares should be,treated as common shares and when they are. outstanding during the reporting period,Read more chapter 3. Diluted EPS The foundations, Diluted EPS includes To determine diluted EPS adjustments are made.
not only common to the numerator and denominator of basic EPS to. shares outstanding reflect the income and weighted average number. but also shares that of shares that would have existed had the. would be issued potential common shares been common shares. assuming the exercise during the entire period or for the period of time. and conversion of that the potential common shares were. potential common outstanding,Potential common shares are not included in. diluted EPS if they are antidilutive i e the,exercise or conversion would increase EPS. Because an entity needs to determine whether,each class of potential common shares is. antidilutive the calculation of diluted EPS requires. a step by step approach,Read more chapter 4,Participating securities and the two class method. The two class method A multilayered capital structure can contain. is used to determine instruments such as,income available to.
participating equity securities i e equity,common shareholders. securities that participate in dividends with,when an entity has a. multilayered capital common shares according to a predetermined. structure containing formula and or, 2018 KPMG LLP a Delaware limited liability partnership and the U S member firm of the KPMG network of independent member. firms affiliated with KPMG International Cooperative a Swiss entity All rights reserved. Earnings per share 6,1 Executive summary, different types of a class of common shares with a dividend rate. securities with the different from that of another class of. right to participate in common shares but without prior or senior. earnings rights,The numerator in the basic EPS calculation is.
adjusted for the effects of these instruments,because they may reduce the entitlement of. common shareholders to the entity s income The,adjustment is determined by applying the two. class method,Read more chapter 5,Consideration of specific instruments. Calculating basic and This Handbook discusses how to deal with the. diluted EPS often following types of instruments or events in EPS. requires taking calculations,numerous types of,common shares issued in full for cash or. equity instruments,and potential partially paid, common shares into stock dividends splits and rights issues.
account Each type of common shares issued to settle liabilities or. relevant instrument acquire assets including a business. requires a separate unvested common shares including restricted. analysis to determine stock, its effect on EPS options warrants and their equivalents. contingently issuable common shares and,potential common shares and shares subject. convertible instruments,contracts that may be settled in shares or in. preferred shares,written put options and forwards,purchased puts and calls. instruments over shares in or issued by a,subsidiary joint venture or equity method.
instruments with a down round feature,Read more chapter 6. 2018 KPMG LLP a Delaware limited liability partnership and the U S member firm of the KPMG network of independent member. firms affiliated with KPMG International Cooperative a Swiss entity All rights reserved. Earnings per share 7,1 Executive summary,Retrospective adjustments. EPS for comparative EPS is retrospectively adjusted for comparative. periods is periods when a change in an entity s capital. retrospectively structure results in a change in the number of. adjusted in certain outstanding common shares without a. circumstances corresponding change in the entity s resources or. capital base,Examples include,issuance of a stock dividend stock split or. reverse stock split,issuance of a rights issue with a bonus. element to all existing shareholders,consummation of a reverse acquisition or a.
business combination of entities under,common control. an accounting change that is applied,retrospectively or error correction. Read more chapter 7,EPS in interim financial statements. Topic 260 applies to The extent to which Topic 260 applies to interim. interim financial financial statements depends on the type of. statements interim financial statements issued,Full interim financial statements The same. EPS presentation and disclosures that are,required in annual financial statements.
regarding EPS information are required this,includes disclosures in Topic 270 interim. financial statements,Condensed interim financial statements. There are similar but fewer EPS disclosures,than required for full interim financial. statements and EPS information is required on,the face of the condensed income statement. Summarized interim financial data The,disclosure requirements in Topic 270 are not.
applicable,Read more chapter 8, 2018 KPMG LLP a Delaware limited liability partnership and the U S member firm of the KPMG network of independent member. firms affiliated with KPMG International Cooperative a Swiss entity All rights reserved. Earnings per share 8,1 Executive summary,Presentation and disclosure. Topic 260 requires An entity presents and discloses EPS information. presentation of and for every period for which an income statement is. disclosures about EPS presented,information for every. An entity also has specific disclosure requirements. period for which an, income statement is for the current period when a transaction has. presented occurred after the reporting period but before the. financial statements are issued that would have,materially changed the number of common shares.
or potential common shares outstanding if it had,occurred before the end of the period. Read more chapter 9, The general principles The general principles apply to the calculation of. for calculating EPS EPU by an MLP Topic 260 provides guidance on. also apply to an MLP s how to apply those principles when the MLP. calculation of treats payments to IDR holders as equity. earnings per unit distributions It also provides guidance specific to. ASU 2017 11 Earnings Per Share Topic 260 Distinguishing Liabilities from Equity Topic 480 Derivatives and Hedging Topic 815 Part I Accounting for Certain Financial Instruments with Down Round Features ASU 2018 07 Compensation Stock Compensation Topic 718 Improvements to Nonemployee Share Based Payment Accounting

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