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SFAS
No. 24 Earnings
Per Share |
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Revised by the Financial
Accounting Standards Committee In Taiwan on 11 November 1999 |
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Summary |
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The purpose of this Standard is to
establish the accounting standards for the calculation |
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and disclosure of earnings per share for publicly traded
enterprises. |
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Earnings per share (EPS hereinafter) referred in this
Statement is defined as the amount |
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of profit earned or loss incurred attributable to each share
of common stock of an |
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enterprise during an accounting period. |
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Types of Capital Structure |
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An enterprise’s capital structure can be classified as
either a simple or a complex capital |
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structure.
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(a) A simple capital structure means that an
enterprise issues common stock
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only, or issues both common stock and non-convertible preferred
stock. An |
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enterprise with a simple capital structure should present basic EPS
on the |
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face of the income statement to present earnings or loss per common
share |
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in the current period.
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(b) A complex capital structure means that an
enterprise issues common stock
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and convertible securities. An enterprise with a complex capital
structure
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should consider the dilutive effects of potential common shares and
present |
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basic EPS and diluted EPS on the face of the income statement, and
is |
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known as “dual presentation.” |
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Basic Earnings Per Share |
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Basic EPS shall be calculated by
dividing the net income (or loss) for the reporting |
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period attributable to common
stockholders by the weighted average number of
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common shares outstanding during that
period. Furthermore, contingently issuable |
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shares shall be considered outstanding
from the date when all necessary conditions |
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have been satisfied and shall be
included in the calculation of weighted-average number |
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of common shares outstanding. Lastly,
the weighted-average number of common shares
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outstanding shall be adjusted
currently and retroactively for the increase (or reduction)
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in common shares outstanding.
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Diluted Earnings Per Share |
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Diluted EPS shall be calculated by the
net income (or loss) attributable to common |
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stockholders and the weighted-average
number of shares outstanding shall be adjusted
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for the effects of all dilutive
potential common shares. |
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In computing the diluted EPS, the
assumed increase in common shares from stock |
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options or warrants that have dilutive
effect shall first be added to the denominator. |
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Secondly, the individual EPS
calculated of ‘if-converted’ method shall be computated in |
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the diluted EPS computation in the
ascending order.
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The treasury stock method shall be
used to test whether or not call options, stock |
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rights or warrants have dilutive
effects in calculating diluted EPS. Under this method: |
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(a) Common shares shall be assumed to be issued
based upon the exercise of call
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options, stock options or warrants at the beginning of the period
(or at |
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agreement date, if later). |
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(b) The proceeds from exercise of call options,
stock options or warrants shall be |
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assumed to be used for purchase of common stock at the average
market
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price during the period.
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(c)
The incremental shares shall be included in the denominator of the
diluted
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EPS computation.
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The ‘if-converted’ method shall be
used to test whether or not convertible bonds or
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convertible preferred stocks have
dilutive effects. That is, assuming convertible bonds
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or convertible preferred stocks have
been converted at the beginning of the reporting
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period, therefore, increasing the
number of common shares outstanding. The resulting
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savings in after-tax interest expenses
or preferred stock dividends, will increase the net
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income attributable to common shares.
The increase in net income shall be divided by
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the increase in the weighted-average
common shares outstanding in the calculation of
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individual EPS of convertible bonds or
convertible preferred stock.
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Furthermore, contingently issuable
shares may increase the number of common shares
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in the future, the following
accounting treatment should be applied:
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(a) If all necessary conditions have been
satisfied by the end of the period,
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those shares shall be included as of the beginning of the period in
which the |
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conditions were satisfied. |
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(b) If all necessary conditions have not been
satisfied by the end of the period, |
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those contingently issuable shares shall be included in the
denominator of
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diluted EPS as of the beginning of the period (or as of the date of
the
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contingent stock agreement, if later).
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Lastly, the weighted-average number of
common shares outstanding shall be adjusted |
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currently and retroactively for the
increase (or reduction) in common shares |
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outstanding. |
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This Statement also specifies
disclosures about earnings per share. |
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Effective
date
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This Statement becomes effective for the fiscal year ending on and
after December |
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31, 2002.
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