After studying this chapter, you should be able to: Understand why earnings per share (EPS) is an important number, understand when and how earnings per share must be presented, including related disclosures, calculate earnings per share for companies with a simple capital structure,. | 1 CHAPTER 17: EARNINGS per SHARE 2 CHAPTER 17: Earnings Per Share After studying this chapter, you should be able to: Understand why earnings per share (EPS) is an important number. Understand when and how earnings per share must be presented, including related disclosures. Calculate earnings per share for companies with a simple capital structure. Calculate earnings per share for companies with a complex capital structure. Understand how analysis helps users of financial statement assess performance. Identify the major differences in accounting between IFRS and ASPE, and what changes are expected in the near future. 3 3 Objective of EPS Earnings per share tells common shareholders how much of the available income is associated with the shares they own (their share of the pie) Provides insight to common shareholders about: Future dividend payout The value of their shareholdings Impact of other financial instruments on their potential earnings (Diluted EPS) 4 4 LO1 Understand why earnings per share (EPS) is an important number. EPS Calculation Income available to common shareholders EPS = Weighted average number of common shares 5 5 LO1 Understand why earnings per share (EPS) is an important number. EPS Calculation Basic EPS Actual earnings and actual number of issued common shares (prorated for the time period that the shares have been outstanding) Diluted EPS Earnings and number of common shares adjusted for “what-if” What would the EPS be if any financial instruments that could be converted to common shares were actually converted 6 6 LO1 Understand why earnings per share (EPS) is an important number. Presentation & Disclosure Under IFRS, EPS must be reported as part of the income statement Exception: non public (privately held) corporations (., EPS not required under ASPE) Reported for each income component as reported on the income statement EPS relating to discontinued operations (if applicable) may be presented on face of income statement, or disclosed in | 1 CHAPTER 17: EARNINGS per SHARE 2 CHAPTER 17: Earnings Per Share After studying this chapter, you should be able to: Understand why earnings per share (EPS) is an important number. Understand when and how earnings per share must be presented, including related disclosures. Calculate earnings per share for companies with a simple capital structure. Calculate earnings per share for companies with a complex capital structure. Understand how analysis helps users of financial statement assess performance. Identify the major differences in accounting between IFRS and ASPE, and what changes are expected in the near future. 3 3 Objective of EPS Earnings per share tells common shareholders how much of the available income is associated with the shares they own (their share of the pie) Provides insight to common shareholders about: Future dividend payout The value of their shareholdings Impact of other financial instruments on their potential earnings (Diluted EPS) 4 4 LO1 Understand why .
