Accounting for Stock Options and Earnings per Share

These flashcards cover key terms and concepts related to stock options and earnings per share calculations, suitable for exam preparation.

Book Value Method

A method used to record the conversion of preferred stock by using the carrying amount of the convertible securities.

Fair Value Method

A method used to compute total compensation expense for stock options based on the fair value at the grant date.

Antidilutive Securities

Securities whose inclusion in earnings per share computations would cause basic earnings per share to exceed diluted earnings per share.

Convertible Bonds

Bonds that can be converted into a predetermined number of common shares.

Incentive Stock Options

Stock options granted to employees which can provide tax benefits when certain conditions are met.

Weighted Average Shares Outstanding

A calculation used to determine the number of shares outstanding over a specific period, considering any stock dividends or splits.

Diluted Earnings Per Share (DEPS)

A measure of earnings per share that accounts for all potential dilutive securities.

Basic Earnings Per Share (BEPS)

A measure of earnings per share calculated using only the number of common shares currently outstanding.

Stock Options

Contracts that give employees the right to purchase company stock at a specified price.

Market Value of Stock

The current price at which a share of stock can be bought or sold in the market.