Professional Documents
Culture Documents
PowerPoint Authors:
Susan Coomer Galbreath, Ph.D., CPA
Charles W. Caldwell, D.B.A., CMA
Jon A. Booker, Ph.D., CPA, CIA
Cynthia J. Rooney, Ph.D., CPA
Copyright2013byTheMcGrawHillCompanies,Inc.Allrightsreserved.
19-2
Share-Based Compensation
Stock Award Plans
Compensation:
Salary
Stock awards
19-3
19-4
19-5
19-6
19-7
19-8
19-9
1910
850
150
1,000
1911
1912
Net
Net income
income (after
(after tax)
tax) Preferred
Preferred dividends*
dividends*
Weighted-average
Weighted-average outstanding
outstanding common
common stock
stock
1913
1914
Annual
Weighting
New
Shares
New
Shares
1915
1916
1917
New
Shares
Stock dividend
adjustment
1918
No
Stock
Stock dividend
dividend or
or split
split
is
is treated
treated as
as
outstanding
outstanding from
from the
the
beginning
beginning of
of the
the
period.
period.
1919
Reacquired Shares
If shares were reacquired during the
period, the weighted-average number of
shares is reduced. The number of
reacquired shares is time-weighted for
the fraction of the year they were not
outstanding.
1920
Reacquired Shares
Compute the weighted-average number of shares
of common stock outstanding.
1921
Reacquired Shares
Compute the weighted-average number of
shares of common stock outstanding.
Annual
Weighting
Annual
Weighting
New
Shares
Treasury
Shares
Earnings Available to
Common Shareholders
1922
1923
Stock
Stock options,
options, rights,
rights, and
and warrants
warrants
Convertible
Convertible bonds
bonds and
and stock
stock
Contingent
Contingent common
common stock
stock issues
issues
Contingently
issuable
shares
Stock
Options
Convertible
securities
Treasury stock
method
If-converted
method
Dilution/Antidilution Test
1924
1925
1926
1927
1928
Convertible Securities
The if-converted method is used for
convertible debt and equity
securities.
The method assumes conversion
occurs as of the beginning of the
period or date of issuance, if later.
1929
Convertible Securities
The assumed conversion of convertible bonds
or preferred stock has two effects on dilutive
earnings per share:
1.
2.
1930
Convertible Securities
Dilutive earnings per share may decrease
or increase after the assumed conversion.
IfIf dilutive
dilutive earnings
earnings per
per share
share decreases,
decreases, the
the
securities
securities are
are dilutive
dilutive and
and are
are assumed
assumed
converted.
converted.
IfIf dilutive
dilutive earnings
earnings per
per share
share increases,
increases, the
the
securities
securities are
are antidilutive
antidilutive and
and are
are not
not
considered
considered converted.
converted.
1931
1932
1933
Some
Some target
target performance
performance
level
level has
has already
already been
been
met
met and
and is
is expected
expected to
to
continue
continue to
to the
the end
end of
of the
the
contingency
contingency period.
period.
Example:
Example: Additional
Additional shares
shares may
may be
be
issued
issued based
based on
on future
future earnings.
earnings.
1934
1935
Summary
1936
Summary
1937
1938
1939
Summary
The
The fair
fair value
value of
of an
an option
option is
is (a)
(a) its
its intrinsic
intrinsic value
value plus
plus (b)
(b)
its
its time
time value
value of
of money
money plus
plus (c)
(c) its
its volatility
volatility component.
component.
1940
1941
1942
End of Chapter 19