The concepts this week are very abstract to me but after the reading I
think I have a better understanding. I think it is a good policy that
companies have to report convertible securities if they affect the
earnings per share (Wahlen, 2017, sec 16-8c). a Without this rule it
would be easier for companies not to show debt or potential release
of convertible common stock into the market that would lower their
earning per share. a This would give a false sense of performance to
shareholders and potential investors (Wahlen, 2017, sec 16-6). a As a
shareholder receiving proper information is vital in making decisions
on stocks to hold or sell. a For instance, in the Starbucks example in
the text there is small difference between the basic EPS and the
diluted EPS (Wahlen, 16-8g). a This shows me that Starbucks is in a
healthy position because there is a low chance of a conversion of a
large number of common stocks which would lower the price.
Whalen, J. M., Jones, J. P., & Pagach, D. P. (2017). Intermediate
accounting: Reporting and analysis. Boston, MA: Cengage Learning.
