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US GAAP vs. IFRS: the basics, March 2010 - Earnings per share - Ernst & Young - United States

US GAAP vs. IFRS: the basics, March 2010

Earnings per share

Similarities

Entities whose ordinary shares are publicly traded, or that are in the process of issuing such shares in the public markets, must disclose earnings per share (EPS) information pursuant to ASC 260 (formerly FAS 128) and IAS 33 (both entitled Earnings per Share) which are substantially the same. Both require presentation of basic and diluted EPS on the face of the income statement, and both use the treasury stock method for determining the effects of stock options and warrants on the diluted EPS calculation. Both US GAAP and IFRS use similar methods of calculating EPS, although there are a few detailed application differences.

Significant differences


Joint venturesIFRS
Contracts that may be settled in shares or cash.Presumption that such contracts will be settled in shares unless evidence is provided to the contrary.Such contracts are always assumed to be settled in shares.
Calculation of year-to-date diluted EPS for options and warrants using the treasury stock method and for contingently issuable sharesThe number of incremental shares is computed using a year-to-date weighted average of the number of incremental shares included in each quarterly calculation.The number of incremental shares is computed as if the entire year-to-date period were “the period” (that is, do not average the current period with each of the prior periods).
Treatment of contingently convertible debtPotentially issuable shares are included in diluted EPS using the “if-converted” method if one or more contingencies relate to the entity’s share price.Potentially issuable shares are considered “contingently issuable” and are included in diluted EPS using the if-converted method only if the contingencies are satisfied at the end of the reporting period.

Convergence

The Boards had been jointly working on a short-term convergence project to resolve the differences in the standards, with both Boards issuing exposure drafts in August 2008. In April 2009, the Boards decided to delay the EPS convergence project pending completion of other projects.

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