Financial Statement Presentation, EPS, and Stockholders' Equity

A comprehensive vocabulary review of financial statement presentation, discontinued operations, foreign currency transactions, comprehensive income, basic and diluted EPS, SEC reporting forms, and stockholders' equity concepts.

Full Set of Financial Statements

A complete financial presentation comprising the Statement of Financial Position (balance sheet), Statement of Earnings (income statement), Statement of Comprehensive Income, Statement of Cash Flows, and Statement of Changes in Owners' Equity.

Classified Balance Sheet

A balance sheet presentation that explicitly distinguishes current assets and liabilities from non-current assets and liabilities.

Multiple-Step Income Statement

An income statement format that presents operating revenues and expenses separately from nonoperating revenues, nonoperating expenses, and other gains and losses.

Single-Step Income Statement

An income statement format where total expenses are subtracted directly from total revenues to determine income from continuing operations, without distinguishing operating items from nonoperating items.

Discontinued Operations Criteria

The disposal of a component, group of components, business activity, or nonprofit activity reported separately only if it represents a strategic shift that has or will have a major effect on an entity's operations and financial results.

Components of Discontinued Operations Gain (Loss)

The total results of discontinued operations, consisting of an impairment loss, a gain (loss) from actual operations, and a gain (loss) on disposal.

Subsequent Increase in Fair Value of a Discontinued Component

A gain recognized in the period of increase for fair value minus costs to sell, limited so it does not exceed the previously recognized cumulative loss.

Forward Exchange Contract

An agreement to exchange two different currencies at a specific future date and at a specified exchange rate.

Foreign Currency Transaction Gains and Losses

Gains or losses arising from foreign currency transactions that are included directly in determining net income for the period.

Comprehensive Income

The change in equity (net assets) of an entity during a period resulting from transactions and other events and circumstances from nonowner sources.

Other Comprehensive Income (PUFI)

Nonowner changes in equity excluded from net income, remembered by the mnemonic PUFI: Pension adjustments; Unrealized gains and losses on available-for-sale debt securities and hedges; Foreign currency translation adjustments and gains/losses on certain foreign currency transactions; Instrument-specific credit risk for liabilities (using FV) and their changes in FV.

Basic Earnings Per Share (EPS)

The measure of performance for a simple capital structure (only common stock outstanding), calculated as:

$$\frac{\text{Income available to common shareholders}}{\text{Weighted average number of common shares outstanding}}$$

Potentially Dilutive Securities

Instruments that may reduce EPS upon conversion or exercise, including stock options and warrants (and their equivalents), convertible securities (bonds or preferred stock), contracts settled in stock or cash, and contingent issuable shares.

Diluted Earnings Per Share (EPS)

The measure of performance for a complex capital structure, calculated as:

$$\frac{\text{Income available to common shareholders assuming conversion of all dilutive securities}}{\text{Weighted average common shares outstanding after conversion of all dilutive shares}}$$

Antidilution Rule

The requirement that any conversion, exercise, or contingent issuance having an antidilutive effect (increasing EPS or decreasing loss per share) is excluded from the diluted EPS calculation unless actual conversion, exercise, or contingency satisfaction has occurred.

Form 10-K

An annual report filed by U.S. registered companies containing a summary of financial data, MD&A, and audited financial statements prepared in accordance with U.S. GAAP.

Form 10-Q

A quarterly report filed by U.S. registered companies containing unaudited financial statements, interim MD&A, and specific disclosures.

Common Stock

The residual ownership interest in a corporation, providing voting rights, dividend rights, and liquidation rights to share in remaining assets after satisfying creditor and preferred stockholder claims.

Preferred Stock

A class of equity that typically carries features such as being convertible, callable, or redeemable, with dividend rights that may be cumulative and/or participating.

Cost Method of Accounting for Treasury Stock

A treasury stock method where repurchased shares are recorded, carried, and reissued at reacquisition cost; reissuance gains are credited to Paid-in Capital—Treasury Stock, and losses are charged against prior gains then retained earnings; reported as a deduction from total stockholders' equity.

Par Value Method of Accounting for Treasury Stock

A treasury stock method where repurchased shares are recorded at par value; acquisition costs exceeding par value reduce Paid-in Capital—Treasury Stock and then retained earnings; reported as a deduction directly from capital stock.

Small Stock Dividend

A dividend issuance of $< 20\%\text{--}25\%$ of outstanding shares, accounted for by transferring the fair market value of the additional shares from retained earnings to capital stock and additional paid-in capital on the declaration date.

Large Stock Dividend

A dividend issuance of $> 20\%\text{--}25\%$ of outstanding shares, accounted for by transferring only the par value of the additional shares from retained earnings to capital stock.