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Earnings Per Share

This template computes basic and diluted earnings per share from continuing operations, discontinued operations, extraordinary items, and net income following the requirements of FASB ASC 260-10,
Earnings Per Share—Overall
.

Entering Data

All of the data needed to compute earnings per share is entered on the Input worksheet. Enter amounts for each component of net income in the Income Information section of the Input worksheet. Also enter any claims of preferred stockholders on income in the cell labeled Dividends on preferred stock.
Because earnings per share is a measure of income available to common stockholders, income must be adjusted for any claims to it by preferred stockholders before computing earnings per share. The template uses the amount entered in the cell labeled Dividends on preferred stock to adjust income for those claims. Enter all claims in that cell, including dividends declared on noncumulative preferred stock (whether or not paid) and any dividends on cumulative preferred stock (whether or not paid or declared).  
Enter the number of shares of common stock and potential common stock outstanding during the period and the fraction of the period they were outstanding. Based on that information, the template automatically computes the weighted average number of shares outstanding during the period. If items of potential common stock are present, also enter the effect their conversion to common shares would have had on the various components of net income. For example, dividends on convertible preferred stock would increase income from continuing operations available to common stockholders since they would not have been paid if the convertible preferred stock had been converted to common shares. Similarly, interest expense (net of tax) recognized during the period on convertible debt would increase income if the debt had been converted to common shares.
Note that, when entering information about potential common stock, the number of shares of common stock should be entered -- not the number of shares of the potential common stock. For example, if 1,000 shares of convertible preferred stock may be converted to 500 shares of common stock, 500 shares would be entered in the worksheet, not 1,000 shares.
Generally, the number of common shares related to stock options, warrants, and their equivalents should be determined using the treasury stock method. That method assumes the proceeds that would have been received on conversion were used to purchase previously issued common stock at the average market price during the period and any common shares that could not have been purchased on the open market (because the assumed proceeds would have been insufficient) were issued from previously unissued shares. Thus, the earnings per share calculations should consider only the incremental number of common shares that would have been issued on conversion of those securities (that is, the difference between the number of shares assumed to be issued and the number of shares assumed to be purchased).
While potential common stock should be included in earnings per share calculations only if it has a dilutive effect on per share amounts, it is not necessary to determine whether potential common stock is dilutive or antidilutive. The template considers all potential common stock entered on the Input worksheet and computes diluted earnings per share using only those securities that are dilutive.