The Board tentatively decided at its meeting in March 2007 to make changes to the calculation of earnings per share (EPS) including the use of the �fair value method�. The Board considered at this meeting an analysis of the application of the proposed changes to particular types of instruments. The instruments and application issues reviewed were:
- Written put options on own shares
- Instruments in which an embedded option is accounted for at fair value
- Allocation of actual dividends under the two-class method
- Forward purchase contracts for own shares.
The Board observed that the application of the proposed amendments to IAS 33 and SFAS 128 Earnings per Share resulted in the same EPS denominator for written put options.
The Board tentatively decided that the fair value method should be applied to instruments in which the embedded conversion option is accounted for at fair value through profit or loss.
The Board considered the allocation of dividends in the application of the two-class method and tentatively decided that actual dividends rather than hypothetical dividends should be used.
The Board also considered the effect of the March 2007 decisions on EPS on forward purchase contracts. It noted that convergence of the calculation of the denominator for EPS was achieved except for physically settled forward purchase contracts. The Board noted that EPS is the same when the dividend rights associated with the share are not amended by the forward contract. However, the Board noted that convergence is not achieved in circumstances when dividends paid on the shares are remitted back to the company as part of the terms of the forward contract. The Board asked the staff to consider how IFRSs and US GAAP might converge on this issue.
The Board also tentatively decided that the exposure draft for the revised IAS 33 should have a 120-day comment period.