Comparison between U.S. GAAP and International ... - Grant Thornton

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Comparison between U.S. GAAP and International Financial Reporting Standards 140 IFRS into ordinary shares during the period are included in the calculation of diluted earnings per share from the beginning of the period to the date of conversion; from the date of conversion, the resulting ordinary shares are included in both basic and diluted earnings per share (IAS 33.38). Method of determining whether or not dilutive Potential ordinary shares are treated as dilutive when, and only when, their conversion to ordinary shares would decrease earnings per share or increase loss per share from continuing operations (IAS 33.41). In determining whether potential ordinary shares are dilutive or antidilutive, each issue or series of potential ordinary shares is considered separately rather than in the aggregate. The sequence in which potential ordinary shares are considered may affect whether they are dilutive. Therefore, to maximise the dilution of basic earnings per share, each issue or series of potential ordinary shares is considered in sequence from the most dilutive to the least dilutive (i.e. dilutive potential ordinary shares with the lowest earnings per incremental share are included in the diluted earnings per share calculation before those with a higher earnings per incremental share.) Options and warrants are generally included first because they do not affect the numerator of the calculation (IAS 33.44). Options, warrants and their equivalents The treasury share method is used when calculating diluted earnings per share. An entity shall assume the exercise of dilutive options and warrants of the entity. The assumed proceeds from these instruments are regarded as having been received from the issue of ordinary shares at the average market price of ordinary shares during the period. The difference between the number of ordinary shares issued and the number of ordinary shares that would have been issued at the average market price of ordinary shares during the period shall be treated as an issue of ordinary shares for no consideration (IAS 33.45). U.S. GAAP Method of determining whether or not dilutive Similar to IFRS (ASC 260-10-45-16 through 45-20). Similar to IFRS (ASC 260-10-45-18). Options, warrants and their equivalents Unlike IFRS, when applying the treasury stock method the number of incremental shares included in quarterly diluted EPS is computed using the average market prices during the three months included in the reporting period. For year-to-date diluted EPS, the number of incremental shares to be included in the denominator is determined by computing a year-to-date weighted average of the number of incremental shares included in each quarterly diluted EPS computation (ASC 260-10-55-3). Employee share options Employee share options with fixed or determinable terms and non-vested ordinary shares are treated as options in the calculation of diluted EPS, even though they may be contingent on vesting. They are treated as outstanding on grant date. Performance-based employee share options are treated as contingently issuable shares because their issue is contingent upon satisfying specified conditions in addition to the passage of time (IAS 33.48). Similar to IFRS (ASC 260-10-45-28 through 45-32). © 2011 Grant Thornton LLP All rights reserved U.S. member firm of Grant Thornton International Ltd
Comparison between U.S. GAAP and International Financial Reporting Standards 141 IFRS Not dealt with by IAS 33. Not dealt with by IAS 33. U.S. GAAP With respect to leveraged ESOPs, ESOP shares that have been committed to be released should be considered to be outstanding. ESOP shares that have not been committed to be released should not be considered to be outstanding (ASC 718-40-45-3). All shares held by a nonleveraged ESOP should be treated as outstanding in computing the employer’s EPS, except the suspense account shares of a pension reversion ESOP, which should not be treated as outstanding until they are committed to be released for allocation to participant accounts (ASC 718-40-45-9). Special rules apply to employers with ESOPs that hold convertible preferred stock (ASC 718-40-45-6 through 45-8). ASC 810-10-45-5 states, “shares of the parent held by a subsidiary shall not be treated as outstanding stock in the consolidated balance sheet.” Thus, such shares would also be considered treasury shares for EPS computation purposes and they would not be included in the denominator. Contingently issuable shares – basic EPS Contingently issuable shares are treated as outstanding and are included in the calculation of basic earnings per share only from the date when all necessary conditions are satisfied (i.e. the events have occurred). Shares that are issuable solely after the passage of time are not contingently issuable shares, because the passage of time is a certainty. Outstanding ordinary shares that are contingently returnable (i.e. subject to recall) are not treated as outstanding and are excluded from the calculation of basic earnings per share until the date the shares are no longer subject to recall (IAS 33.24). Similar to IFRS (ASC 260-10-45-12A through 45-13). Contingently issuable shares – diluted EPS As in the calculation of basic EPS, contingently issuable ordinary shares are treated as outstanding and included in diluted EPS if conditions are satisfied (i.e. the events have occurred). Contingently issuable shares are included from the beginning of the period (or from the date of the contingent share agreement, if later). If the conditions are not satisfied, the number of contingently issuable shares in the diluted EPS is based on the number that would be issuable if the end of the period were the end of the contingency period. Restatement is not permitted if the conditions are not met when the contingency period expires (IAS 33.52). Shares whose issuance is contingent upon the satisfaction of certain conditions shall be considered outstanding and included in the computation of diluted EPS as follows (ASC 260-10-45-48 through 45-57): • If all necessary conditions have been satisfied by the end of the period (the events have occurred), those shares shall be included as of the beginning of the period in which the conditions were satisfied (or as of the date of the contingent stock agreement, if later) • If all necessary conditions have not been satisfied by the end of the period, the number of contingently issuable shares included in diluted EPS shall be based on the number of shares, if © 2011 Grant Thornton LLP All rights reserved U.S. member firm of Grant Thornton International Ltd
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Comparison between U.S. GAAP and International ... - Grant Thornton

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