Question

FASB ASC 6‐6 Earnings Per Share The topic of earnings per share is contained in the FASB ASC. Find, cite the paragraph, and copy the objectives of earnings per share and the glossary of terms associated with earnings per share

Answer 1

Earnings Per Share—

Overall Overview and Background

260-10-05-1 The Earnings Per Share Topic contains only the Overall Subtopic. The Overall Subtopic specifies the computation, presentation, and disclosure requirements for earnings per share (EPS) for entities with publicly held common stock or potential common stock. Computation of EPS is included in Section 260-10-55.

260-10-05-1A An entity may issue a freestanding financial instrument (for example, a warrant) with a down round feature that is classified in equity. This Subtopic provides guidance on earnings per share and recognition and measurement of the effect of a down round feature when it is triggered.

Objective:

1. EPS is a financial ratio that gives us the information regarding earning available to each shareholder.

2. To improve comparability as between two or more companies & as between two or more accounting periods.

3. A higher EPS is a sign of higher earning, strong financial position and therefore a reliable company to invest money.

Glossary

Down Round Feature

A feature in a financial instrument that reduces the strike price of an issued financial instrument if the issuer sells shares of its stock for an amount less than the currently stated strike price of the issued financial instrument or issues an equity-linked financial instrument with a strike price below the currently stated strike price of the issued financial instrument.

A down round feature may reduce the strike price of a financial instrument to the current issuance price, or the reduction may be limited by a floor or on the basis of a formula that results in a price that is at a discount to the original exercise price but above the new issuance price of the shares, or may reduce the strike price to below the current issuance price. A standard antidilution provision is not considered a down round feature.