Earnings-per-share standard gets positive feedback

A review team finds that the rules accomplish their objective.

A post-implementation review team with the Financial Accounting Foundation found that FASB's earnings-per-share standard has accomplished its objectives of simplifying computations of earnings per share and achieving more comparability with international accounting standards.

The team based its conclusions on input from financial statement users, preparers, auditors, and regulators. The team reviewed FASB Statement No. 128, Earnings Per Share, which was issued in 1997, and stated that:

  • Investors rely significantly on earnings per share (particularly diluted earnings per share) as computed using the requirements of Statement No. 128. Investors also find the information reported by organizations about earnings per share in their financial statements to be useful, the review team found.
  • Overall, Statement No. 128 is understandable, can be applied as intended, and enables information to be reported reliably. Organizations with complex capital structures sometimes find it difficult to apply the standard because of the complexity of the financial instruments that they issue.
  • No significant unanticipated consequences occurred as a result of the standard, and implementation and ongoing compliance costs were neither significant nor unexpected.

Because the post-implementation review team has completed all reviews of significant FASB standards that have been effective for at least two to three years, the next post-implementation review of a FASB standard will not be conducted for a few years.


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