On this page
Contingently issuable shares belongs in a reconciled numerator-and-denominator workpaper. Contingently issuable shares become issuable after specified conditions are met. For diluted EPS, apply the reporting-date hypothetical in Topic 260 to the earnings, market-price, or other contingency and include only the supported quantity.
Apply it
A contract adds 50,000 shares if year-to-date earnings reach $8 million. At the reporting date, earnings are $8.4 million and no future service is required. The diluted computation tests the 50,000 shares as if period-end were the contingency date.
Review contingently issuable shares against potential common shares. Reconcile contingently issuable shares to diluted earnings per share, the dated contingently issuable shares evidence, and its final presentation.
Keep the boundary clear
Do not forecast that an unmet future target will probably be achieved unless the specific route requires that conclusion. Basic-EPS inclusion has a separate threshold for conditions already satisfied.
Authority
Read ASC 260-10-45-48 for the diluted-EPS test for contingent shares.
Put the concept to work
Apply this concept
Learning resources
Choose a lesson, try an application, or inspect the sources behind this concept.
Build on these ideas
- Potential common shares — Apply
To apply this concept: Required. This earlier step supplies an input required by the EPS workpaper.