Norwalk, Conn. (Oct. 17, 2003) -- The Financial Accounting Standards Board proposed Thursday a broadening of how companies calculate earnings per share to include common shares to be converted from mandatorily convertible securities.

FASB officials said at a meeting that they expect to issue a rule on the matter sometime this quarter, and make it effective with 2005 financial statements.

These securities, which usually take the form of bonds or preferred stock, differ from other convertibles because their conversion into common shares at a fixed date is guaranteed.

According to the Wall Street Journal, neither U.S. nor international accounting standards on earnings per share have recognized the mandatory-conversion feature of such securities. In response, companies exclude them from basic earnings per shares -- though they do include them in dilutive earnings-per-share calculation.

The International Accounting Standards Board decided this year to count common shares to be converted from mandatorily convertible securities from the date when such convertibles are issued. FASB members voted to adopt this approach.

-- WebCPA staff

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