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U.S. and international standard setters issue earnings-per-share proposals.

The Financial Accounting Standards and the International Accounting Standards Committee have issued similar proposals for computing and presenting earnings per share.

The FASB exposure draft, Earnings per Share and Disclosure of Information about Capital Structure, simplifies the current standards of Accounting Principle Board Opinion no. 15, Earnings per Share. It was issued to harmonize U.S. accounting rules with those of other countries. (For details on the FASB and IASC proposals, see "The FASB and the IASC Redeliberate EPS," J of A, Feb.96, page 43.)

"The United States is one of only a few countries that present primary EPS," said Barry P. Robbins, partner of Price Waterhouse in San Francisco. "Now the FASB has decided to go along with the way the rest of the world has looked at presenting EPS and have a measure that is simple, with common stock outstanding." Robbins said the difference between basic and primary EPS was that common stock equivalents are not considered in the computation of basic EPS.

The proposed statement would require the continued disclosure of certain information about an entity's capital structure. It would be effective for financial statements issued for periods ending after December 15, 1997, and early application would not be permitted. The comment deadline for the FASB exposure draft is May 31, 1996. One copy of the FASB proposal is available from the FASB Order Department, 401 Merritt 7, P.O. Box 5116, Norwalk, Connecticut 06856-5116; (203) 847-0700, ext. 555.

The international proposal

The FASB and the IASC have been working on this project since early 1994. (The IASC's exposure draft is E52, Earnings Per share.) Differences in the two exposure drafts to be reviewed during the comment periods include:

* The IASC proposes disclosure of pro forma amounts reflecting the effect of bonus and rights issues, redemptions of shares, the conversion or exercise of potential ordinary shares and the issuance of warrants and options after the balance sheet date but before the approval of financial statements. The FASB would not adjust the actual EPS reported for the period.

* The FASB proposes using the income from continuing operations as the amount for determining whether a potential ordinary share can be diluted. The IASC uses net income attributable to ordinary shareholders.

* The FASB proposes requiring disclosure of per-share amounts other than net profit, including income from continuing operations. The IASC would require disclosure of only net profit per share but would encourage disclosure of other amounts.

The comment deadline for the IASC exposure draft is June 30, 1996. Copies of IASC exposure draft E52 can be obtained by contacting the IASC at 167 Fleet Street, London EC4A 2ES, England, phone no. 011-44-71-353-0565
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Title Annotation:Financial Accounting Standards Board and the International Accounting Standards Committee
Publication:Journal of Accountancy
Article Type:Brief Article
Date:Apr 1, 1996
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