Fair Value Measurements

EPS is a high-frequency FAR topic and diluted EPS is where most points are lost. AICPA tests the if-converted method for convertible bonds and the treasury stock method for options — and you have to know when a security is antidilutive (excluded from diluted EPS). The trap: convertible bonds are dilutive only if their per-share impact is less than basic EPS. Always run the antidilution test before including any security.