The basic EPS implications of mandatorily convertible instruments are not directly addressed in U.S. GAAP. However, if the instrument is a participating security, an entity should apply the two-class method of calculating EPS. If the instrument is not a participating security, there is no impact on basic EPS. For diluted EPS purposes, if the instrument is a participating security, the more dilutive of the two-class method or if-converted method is applied. If the instrument is not a participating security, an entity would apply the if-converted method to calculate diluted EPS if the effect is dilutive See Sections 220.127.116.11 and 6.4 for more information.
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