Handbook: Earnings per share

Earnings per share

Handbook

US GAAP December 2018

us/frv

Contents

Foreword ......................................................................................................

1

About this publication ..................................................................................

2

1.

Executive summary ........................................................................

4

2.

Scope ..............................................................................................

9

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

Foreword

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 Manual.

-- 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 Answers.

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 NCI

Master limited partnership 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.

 ................
................

In order to avoid copyright disputes, this page is only a partial summary.

Google Online Preview   Download