On this page
Diluted EPS ordering belongs in a reconciled numerator-and-denominator workpaper. Diluted-EPS ordering tests potential common-share instruments from most dilutive to least dilutive. After each inclusion, recompute the running numerator, denominator, and EPS before testing the next item.
Apply it
Basic EPS is $3.00. Instruments have incremental EPS of $0.00, $1.20, and $3.40. Test them in that order. The $3.40 item is excluded if adding it would raise the running EPS.
Record the running result after each inclusion so another reviewer can repeat the test.
Review diluted eps ordering against incremental earnings per share. Reconcile diluted eps ordering to antidilution, the dated diluted eps ordering evidence, and its final presentation.
Keep the boundary clear
A memorized instrument hierarchy cannot replace calculation. Ordering can change with interest, tax rates, conversion terms, average share price, and the reporting-period numerator.
Authority
Read ASC 260-10-45-18 for sequential inclusion for maximum potential dilution.
Put the concept to work
Apply this concept
- Explain and apply diluted eps ordering within a reconciled numerator-and-denominator workpaper using supplied authoritative facts.
Learning resources
Choose a lesson, try an application, or inspect the sources behind this concept.
Build on these ideas
- Incremental earnings per share — Apply
To apply this concept: Required. This earlier step supplies an input required by the EPS workpaper.
Lessons
Worked examples and cases
Practice
Common mistaken ideas
Sources
Standard references
Broader topics
Related concepts
Use this idea next
- Diluted earnings per share — Apply
Required level here: apply. Required. This earlier step supplies an input required by the EPS workpaper.