Chapter 20, Problem 1BCC

Basis for Conclusions Case 1: Antidilutive Securities

Read paragraphs 95 through 99 m Appendix B Background information and basis tor conclusions in FASB s Statement of Financial Accounting Standards No 128

Required

1. a. Why did the Board decide lo require an antidilution sequence that considers securities m the order of most dilutive to least dilutive?
2. b. What line items could appear on an income statement after income from continuing operations but before net income? Note that when Statement of Financial Accounting Standards No 128 was written companies reported extraordinary items and the effect of changes in accounting principles on the income statement after income from continuing operations. This is no longer true
3. c. The FASB chose income from continuing operations as the number that should be used to determine whether sec unties are dilutive or antidilutive. Why did it choose income from continuing operations as opposed to net income?
4. d. Did the constituents who wrote comment letters about the exposure draft of Statement of Financial Accounting Standards No 128 agree with the use of income from continuing operations as opposed to net income as the control number for the determination of which securities are dilutive?