Question

When calculating the number of shares for diluted earnings per share: Select all that apply. The number of dilutive potential ordinary shares that must be included in the year-to-date period calculation is the weighted average number of the dilutive potential ordinary shares included in each interim dilutive earnings per share computation. The number of ordinary shares shall be the weighted average number of ordinary shares as calculated for basic earnings per share plus the weighted average number of ordinary shares that would be issued on the conversion of all dilutive potential ordinary shares. Dilutive potential ordinary shares (e.g., convertible securities, warrants, share options and contingently issuable shares) are deemed to have been converted, exercised or issued into ordinary shares at the end of the current reporting period. Dilutive potential ordinary shares shall be determined independently for each period presented.

          When calculating the number of shares for diluted earnings per share:
Select all that apply.
The number of dilutive potential ordinary shares that must be included in the year-to-date period calculation is the weighted average number of the dilutive potential ordinary shares included in each interim dilutive earnings per share computation.
The number of ordinary shares shall be the weighted average number of ordinary shares as calculated for basic earnings per share plus the weighted average number of ordinary shares that would be issued on the conversion of all dilutive potential ordinary shares.
Dilutive potential ordinary shares (e.g., convertible securities, warrants, share options and contingently issuable shares) are deemed to have been converted, exercised or issued into ordinary shares at the end of the current reporting period.
Dilutive potential ordinary shares shall be determined independently for each period presented.

Show more…

When calculating the number of shares for diluted earnings per share:
Select all that apply.
The number of dilutive potential ordinary shares that must be included in the year-to-date period calculation is the weighted average number of the dilutive potential ordinary shares included in each interim dilutive earnings per share computation.
The number of ordinary shares shall be the weighted average number of ordinary shares as calculated for basic earnings per share plus the weighted average number of ordinary shares that would be issued on the conversion of all dilutive potential ordinary shares.
Dilutive potential ordinary shares (e.g., convertible securities, warrants, share options and contingently issuable shares) are deemed to have been converted, exercised or issued into ordinary shares at the end of the current reporting period.
Dilutive potential ordinary shares shall be determined independently for each period presented.

Added by Lisa M.

Horngren’s Cost Accounting

Srikant M. Datar, Madhav V. Rajan 16th Edition

Instant Answer

Solved by Expert Tavis Lam

06/12/2025

Step 1

Convertible securities include options, warrants, convertible debt, and anything else that can be turned into common stock. The purpose of calculating diluted EPS is to show the "worst-case" scenario for EPS if all potential shares that could dilute EPS were Show more…

Show all steps

lock

Thanks for your feedback!

When calculating the number of shares for diluted earnings per share: Select all that apply. The number of dilutive potential ordinary shares that must be included in the year-to-date period calculation is the weighted average number of the dilutive potential ordinary shares included in each interim dilutive earnings per share computation. The number of ordinary shares shall be the weighted average number of ordinary shares as calculated for basic earnings per share plus the weighted average number of ordinary shares that would be issued on the conversion of all dilutive potential ordinary shares. Dilutive potential ordinary shares (e.g., convertible securities, warrants, share options and contingently issuable shares) are deemed to have been converted, exercised or issued into ordinary shares at the end of the current reporting period. Dilutive potential ordinary shares shall be determined independently for each period presented.

Play audio

Feedback

Powered by NumerAI

Tavis Lam and 92 other subject Principles of Accounting educators are ready to help you.

Ask a new question

Labs

Want to see this concept in action?

NEW

Explore this concept interactively to see how it behaves as you change inputs.

View Labs

Recommended Videos

Recommended Textbooks

Transcript

0:00 Hello everyone.

00:01 In this lesson, we're going to talk about how to calculate the number of shares used in determining diluted earnings per share or diluted eps.

00:10 This is a key financial metric that reflects the company's profitability assuming all convertible securities like stock options, warrants, and convertible bonds are exercised.

00:21 Companies with complex capital structures must report diluted eps to give a clear picture of how earnings might be affected if those potential shares were converted.

00:30 And surreal ones.

00:32 We'll walk through each rule that applies when calculating the number of shares for diluted eps and identify which statements are correct.

00:40 Option a, weighted average used for interim diluted eps.

00:45 When you're calculating diluted eps for a year to date period, like in a quarterly report, you must include the weighted average number of dilutive potential ordinary shares across each interim period.

00:57 This ensures consistency and comparability between periods.

01:01 Rather than calculating from scratch each time.

01:05 This makes option a correct.

01:08 Add dilutive shares to weighted ordinary shares.

01:11 Option b.

01:12 The alluded eps always starts with a basic eps calculation, the weighted average number of ordinary shares.

01:19 Then we add any dilutive potential ordinary shares to that number...

Ace is your personal tutor. It breaks down any question with clear steps so you can learn.

Start Using Ace

Continue solving this problem

Create a free account to:

View full step-by-step solution
Ask follow-up questions with Ace AI
Save progress and study later