John Wiley & Sons - Intermediate Accounting, 7th Canadian Edition - Chapter 18.pdf

Wireless Earnings
Waterloo, Ontario-based Research In same number. The fully diluted number
Motion (RIM) has experienced incredi- should show the maximum impact to
ble growth, mainly due to the ess earnings for the shareholder and,
of its famous wireless platform, when pany is in a loss position, it
BlackBerry®. In February 1999, when doesn’t work.”
pany listed on NASDAQ, rev- When calculating RIM’s per share
enues were less than $50 million. By figures, Loberto looks at the average
February 2003, they exceeded $300 share price and the number of options
million. There were more than 800,000 outstanding that are “in the money,” at
BlackBerry wireless subscribers by the that average price. These are the
end of 2003, and pany was options that could be exercised, affect-
beginning to profits. ing the diluted earnings. “The fully
Since RIM had reported losses in diluted number is an indication of what
recent years, its basic and fully diluted your earnings per share could be if
earnings per share (EPS) figures have everyone exercised their options,”
been the same. Angelo Loberto, Vice- Loberto says. The basic figure is the
President, Finance, explains: “The only EPS based on number of shares out-
significant difference between our standing; there’s no estimate required.
basic and fully diluted earnings per “If, quarter over quarter, you have
share is that we have to consider significant fluctuations in your share
options that are in the money. So, price, the diluted number can signifi-
when you’re in a loss position and your cantly change as well,” Loberto
denominator—representing the num- explains. Despite this, the diluted
ber of shares outstanding—for the fully EPS—the most conservative measure
diluted calculation goes up, your loss of EPS—is usually the only one ana-
per share goes down. That’s consid- lysts and investors use in assessing a
ered antidilutive, so you show pany, he adds.■
CHAPTER 18
Earnings per