FASB Addresses 'Double-Counting' Issue In Two-Class Method of Computing EPS

The FASB has decided to finalize Staff Position EITF 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities, on the question of how to address concerns that the two-class method of computing basic earnings per share may double count the right...

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Bibliographic Details
Published inAccounting Policy & Practice Report Vol. 4; no. 5; p. 225
Main Author Phillips, Lyda
Format Trade Publication Article
LanguageEnglish
Published Washington Bloomberg BNA 07.03.2008
Subjects
Accounting
Allocations
Compensation
Dividends
Earnings per share
Employees
Fair value
FASB Staff Positions
FSP EITF 03-6-1
International finance
Second class of stock
Stock prices
Stockholders
United States > US
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ISSN1558-6642

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Summary:The FASB has decided to finalize Staff Position EITF 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities, on the question of how to address concerns that the two-class method of computing basic earnings per share may double count the rights to dividends or dividend equivalents. FASB concluded that both distributed and undistributed earnings should be allocated to both common shareholders and unvested share-based payment award holders that are considered participating securities. Some board members expressed concern that by issuing an FSP on this subject FASB may be creating too intricate and detailed guidance under US GAAP, especially as it moves toward convergence with international financial reporting standards.
ISSN:1558-6642