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Earnings per share: 5 things you need to know

06/25/19

We take you back to the basics on earnings per share with 5 things you need to know.

Earnings per share measures get a lot of attention from users of financial statements; however, calculating EPS can be complex. In this episode, John Bishop, PwC partner, joins Heather Horn to provide a refresher on the models and demystify the calculations. Topics include:

2:22 - Basic EPS - John provides an overview of the basic EPS model and then breaks it down step-by-step (numerator and denominator considerations).
6:58- Diluted EPS. Before John dives deeper into the calculations, he provides a brief overview of what diluted EPS is intended to present and the various models to calculate it.
11:52 - Methods of incorporating potentially dilutive securities in diluted EPS. John dives deeper and provides overviews of the treasury stock method, if-converted method, contingent share model, and two class method.
17:51 - Anti-dilutive sequencing. When calculating diluted EPS, proper sequencing is important. John explains how sequencing impacts the calculations and the adjustments and judgments that need to be considered.
23:18 - Application of control number in interim and annual reporting. Last but not least, John shares some reminders on the application of the control number concept in interim and annual reporting.

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About our guest

John Bishop is a partner in PwC's National office and the co-leader of the financial instruments team. In this role, he leads the group in advising the firm’s clients on a wide array of accounting and reporting matters. John specializes in the accounting for derivatives, financial instruments, financing transactions (e.g., securitizations and leasing) and M&A transactions. He has worked with and advised a variety of the firm’s clients including investment banks, commercial banks, private equity firms and companies in the merchant power, utility, real estate and retail industries.

About our host

Heather Horn is PwC’s National office thought leader, responsible for developing our communications strategy and conveying firm positions on accounting and financial reporting matters. She is the engaging host of PwC’s accounting and reporting weekly podcast and quarterly webcast series, as well as periodic webcasts for the power and utilities industry. With over 25 years of experience, Heather’s accounting and auditing expertise includes financial instruments and rate-regulated accounting.