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Diluted earnings per share belongs in a reconciled numerator-and-denominator workpaper. Diluted EPS reflects assumed dilutive potential common shares in both numerator and denominator. Begin with basic EPS, apply the correct method to every in-scope instrument, order the effects, and stop before an antidilutive inclusion.
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A basic numerator of $6,000,000 and denominator of 2,000,000 shares produce $3.00 basic EPS. Dilutive instruments add $200,000 and 300,000 shares, so diluted EPS is $6,200,000 divided by 2,300,000, or about $2.70.
Review diluted earnings per share against basic earnings per share. Reconcile diluted earnings per share to diluted eps ordering, the dated diluted earnings per share evidence, and its final presentation.
Keep the boundary clear
Diluted EPS is not basic EPS plus every possible share. The workpaper must preserve excluded items, control-number testing, dates, numerator adjustments, and full-precision calculations.
Authority
Read ASC 260-10-45-16 for the basic structure of diluted EPS.
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- Diluted EPS ordering — Apply
To apply this concept: Required. This earlier step supplies an input required by the EPS workpaper.
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- EPS numerator and denominator reconciliation — Apply
Required level here: apply. Required. This earlier step supplies an input required by the EPS workpaper.