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Chapter 16: Q4IFRS (page 895)

Briefly discuss the convergence efforts that are under way by the IASB and FASB in the area of dilutive securities and earnings per share.

Short Answer

Expert verified

The convergence of accounting depicts the objectives and the endeavours of laying out a uniform arrangement of accounting measures, which will be globally utilized.

Step by step solution

01

Explanation on convergence efforts

A convergence is an active agenda project conducted mutually by the FASB and the IASB, which expects to bring about at least one guideline that will accomplish a union in specific regions.

02

Explanation related earnings per share convergence

The endeavours that are in progress for a convergence by the IASB and the FASB in a dilutive securities region and in earnings per share are the same. A project is limited to the distinctions between the US GAAP and the IFRS, where an excellent arrangement appears to be reachable, related to the computations of an earnings per share.

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Most popular questions from this chapter

At December 31, 2017, Reid Company had 600,000 shares of common stock issued and outstanding, 400,000 of which had been issued and outstanding throughout the year and 200,000 of which were issued on October 1, 2017. Net income for 2017 was \(2,000,000, and dividends declared on preferred stock were \)400,000. Compute Reid鈥檚 earnings per common share. (Round to the nearest penny.)

All of the following are key similarities between GAAP and IFRS with respect to accounting for dilutive securities and EPS except:

(a) the model for recognizing stock-based compensation.

(b) the calculation of basic and diluted EPS.

(c) the accounting for convertible debt.

(d) the accounting for modifications of share options, when the value increases.

(Conversion of Bonds) On January 1, 2016, when its \(30 par value common stock was selling for \)80 per share, Plato Corp. issued \(10,000,000 of 8% convertible debentures due in 20 years. The conversion option allowed the holder of each \)1,000 bond to convert the bond into five shares of the corporation鈥檚 common stock. The debentures were issued for \(10,800,000.The present value of the bond payments at the time of issuance was \)8,500,000, and the corporation believes the difference between the present value and the amount paid is attributable to the conversion feature. On January 1, 2017, the corporation鈥檚 \(30 par value common stock was split 2 for 1, and the conversion rate for the bonds was adjusted accordingly. On January 1, 2018, when the corporation鈥檚 \)15 par value common stock was selling for $135 per share, holders of 30% of the convertible debentures exercisedtheir conversion options. The corporation uses the straight-line method for amortizing anybond discounts or premiums.

a) Prepare in general journal form the entry to record the original issuance of the convertible debentures.

(b) Prepare in general journal form the entry to record the exercise of the conversion option, using the book value method.

Show supporting computations in good form.

On July 1, 2017, Roberts Corporation issued \(3,000,000 of 9% bonds payable in 20 years. The bonds include detachable warrants giving the bondholder the right to purchase for \)30 one share of \(1 par value common stock at any time during the next 10 years. The bonds were sold for \)3,000,000. The value of the warrants at the time of issuance was $100,000. Prepare the journal entry to record this transaction.

What type of earnings per share presentation is required in a complex capital structure?
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