Volume 5, No. 6


Fixing EPS: The FASB's Basic Solution:  The current rules governing the computation of earnings per share were issued in 1969 by the American Institute of CPAs. Within two years of their issuance, the AICPA had published over 100 interpretations of the standard. Clearly, there was room for improvement: a standard that needed such frequent amending was not likely creating much uniformity in the computation of earnings per share. The years since 1969 have witnessed much globalization of capital markets. This posed another problem with American earnings per share computations: in most other countries, there is no computation of primary earnings per share. This raises yet another obstacle in comparing earnings across countries. The FASB has proposed a revision of standards for the computation of earnings per share which would eliminate the concept of primary earnings per share, and make EPS of U.S. companies more comparable to those of companies in other countries.

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