2003-7 involved a VPF with standard commercial terms similar to the VPF described above, with one notable exception: the counterparty in the ruling did not have the right to borrow the underlying shares
pledged by the counterparty.
Under the Fifo method, the earliest shares
acquired are deemed to be the first sold.
4) For publicly traded shares
, fair market value may be determined by reference to market prices.
Since fewer shares
are considered outstanding under SOP 93-6 than under the old accounting, earnings per share
may increase or decrease under the new rules, even after accounting for the reduction in net income that stems from adopting the SOP.
But there was never a guarantee that a company's shares
would increase just because of an announcement the day before.
The objective of basic EPS is to measure performance for the reporting period by dividing income available to common shareholders by the weighted average number of shares
outstanding (see the flowchart on pages 64-66).
If the 1,000 shares
offered as payment are mature ISO shares
and the 5,000 shares
are offered under an ISO plan:
Their worst stock was eToys: 333 shares
bought for $68.
Dividends on ESOP shares
are charged to retained earnings.