Appendix A — Differences Between U.S. GAAP and IFRS Accounting Standards

Scope

Presentation of EPS for investment companies and wholly owned subsidiaries is not required.

There are no scope exceptions related to presenting EPS for investment companies or wholly owned subsidiaries.

Numerator (earnings)

Many accounting differences between U.S. GAAP and IFRS Accounting Standards affect income available to common shareholders. These differences will result in differences in EPS.

See U.S. GAAP column.

Numerator (earnings): forward and option contracts for which physical settlement by repurchase of equity shares is or may be required

Other than forward contracts that must be physically settled by repurchase of a fixed number of the issuer’s equity shares, forward and option contracts for which physical settlement by repurchase of equity shares is or may be required are measured at fair value, with changes in fair value recognized in earnings. Contracts measured at fair value include (1) forward contracts to purchase outstanding shares that give the counterparty (holder) the option to elect either gross physical or net settlement and (2) written options that give the counterparty the right to put outstanding shares to the entity regardless of the form of settlement (i.e., gross physical or net settlement).

Such contracts are liabilities measured on the basis of the gross present value amount that the issuer could be required to pay to repurchase its own equity shares.

Because the accounting differs for these contracts (except for forward contracts that must be physically settled), basic and diluted EPS under IFRS Accounting Standards will differ from basic and diluted EPS under U.S. GAAP. This is because earnings (i.e., the numerator) include changes in the fair value of these contracts under U.S. GAAP, whereas the amount of earnings under IFRS Accounting Standards is the change in the present value of the amount that the issuer could be required to pay to repurchase its own equity shares.

Treatment of mandatorily redeemable common shares and forward contracts for which physical settlement of a fixed number of shares for cash is required.

Basic EPS — Exclude the common shares (and any related earnings effect) that are to be redeemed or repurchased in the calculation of EPS. Apply the two-class method of calculating EPS.

Diluted EPS — No further adjustment to the numerator or the denominator is necessary.

Forward contracts for which physical settlement of a fixed number of shares for cash is required:

• Basic EPS — Treat the shares as outstanding (and include any earnings impact in the numerator).
• Diluted EPS — Apply the reverse treasury stock method to the extent that the instrument is dilutive.

Mandatorily redeemable common shares (basic and diluted EPS):

These shares are typically excluded from the denominator.

Treatment of mandatorily convertible instruments

If the instrument is a participating security, entities should apply the two-class method (the results of doing so are similar to those achieved when an entity considers the shares outstanding) to calculate basic EPS and the more dilutive of the two-class method or if-converted method to calculate diluted EPS.

If the instrument is not a participating security, entities do not adjust the numerator or denominator in calculating basic EPS. The if-converted method is applied to calculate diluted EPS.

Ordinary shares that will be issued upon conversion are considered outstanding in the calculation of basic EPS from the date the contract is entered into, irrespective of whether the contract is participating. The result is similar to that achieved by applying the two-class method, but the presentation differs. However, the EPS result differs from that calculated under U.S. GAAP when the instrument is not a participating security.

For diluted EPS, the shares are considered outstanding and no adjustment is made to the numerator.

Application of the two-class method to participating securities

The two-class method applies to participating securities irrespective of whether they are debt or equity instruments. ASC 260 includes detailed guidance on such application.

The two-class method applies only to participating securities that are equity instruments. It is not required for participating debt instruments (e.g., participating convertible debt). There is no detailed guidance on such application.

Denominator for diluted EPS: treasury stock method — year-to-date calculation

For year-to-date diluted EPS, the number of incremental shares included in the denominator is determined by using a weighted average of the number of incremental shares included in each quarterly calculation of diluted EPS.

The number of incremental shares is determined independently for each period presented. The number of dilutive potential ordinary shares in the year-to-date period is not a weighted average of the dilutive potential ordinary shares included in each interim calculation.

Denominator for diluted EPS: contingently issuable shares

Shares whose issuance is contingent on the satisfaction of certain conditions are included in the denominator for diluted EPS if all necessary conditions have been met by the end of the reporting period.

For year-to-date calculations, the number of contingent shares included in the denominator of diluted EPS is determined by weighting the interim periods.

Contingently issuable ordinary shares are included in the denominator for diluted EPS if the conditions are met (i.e., have occurred).

Weighting interim periods in the year-to-date calculation is not permitted. See “Denominator for diluted EPS: treasury stock method — year-to-date calculation” above.

Denominator for diluted EPS: contingently convertible instruments

Shares issuable upon the conversion of a convertible instrument that contains a market price trigger are included in the calculation of diluted EPS regardless of whether the market price trigger has been met as of the reporting date. If a convertible instrument becomes convertible only if a substantive non-market-based contingency is met, the shares are included in the calculation of diluted EPS only if the non-market-based contingency has been met as of the reporting date.

Shares issuable upon the conversion of a contingently convertible instrument are included in the calculation of diluted EPS if the contingency has been met as of the reporting date. The nature of the contingency that must be met for conversion to occur is not relevant.

Denominator for diluted EPS: contracts that may be settled in cash or shares

Inclusion of the shares in diluted EPS is based on a presumption that the contract will be settled in shares (if dilutive). The presumption of share settlement may not be overcome except in the case of certain share-based payment arrangements. Therefore, for contracts that may be settled in cash or shares, if dilutive, share settlement must be used in the calculation of diluted EPS, regardless of whether the issuer or the holder has the right to elect cash or shares.

When shares are included in the denominator of diluted EPS and the contract is classified as an asset or liability, an adjustment to the numerator may be required for any changes in income or loss that would result if the contract had been reported as an equity instrument.

For contracts that may be settled in cash or ordinary shares, diluted EPS must be based on a presumption that the contract will be settled in ordinary shares. The presumption of share settlement may not be overcome. Therefore, for contracts that may be settled in cash or ordinary shares, if dilutive, share settlement must be used in the calculation of diluted EPS, regardless of whether the issuer or holder has the right to elect cash or shares.

When shares are included in the denominator of diluted EPS and the contract either is classified as an asset or liability, or has both an equity and a liability component, the numerator must be adjusted for any changes in profit or loss that would have resulted during the period if the contract had been classified wholly as an equity instrument.