SEC Staff Updates Earnings-Per-Share Guidance

The staff of the SEC Division of Corporation Finance and the Office of the Chief Accountant have revised their policies related to the allocation of expenses and FASB Statement no. 128, Earnings per Share .

Staff Accounting Bulletin (SAB) no. 98 updates SEC staff interpretations and practices to be consistent with recently adopted standards by the FASB. The staff amended provisions in past staff accounting bulletins to

• Eliminate instructions to delete historical EPS in an entity’s financial statements.
• Remove a reference to APB Opinion no. 15, Earnings per Share , and remind registrants of the pro forma requirements of the SEC’s regulation S-X.
• Revise instructions regarding the dilutive effects of stock issued for consideration below the initial public offering (IPO) price or options and warrants to purchase common stock below the IPO price.
• Clarify the applicability of the presentation of income or loss to common stock.
• Replace the terms primary and fully diluted with basic and diluted for selected quarterly financial data.

For more information on SAB no. 98, contact Cody L. Smith in the SEC chief accountant’s office at 202-942-4400 or Kenneth T. Marceron in the Division of Corporation Finance at 202-942-2960.

©1998 AICPA