I am working on the following writing assignment: Case 3.1 Your audit senior, Quinn, is reviewing the
Question:
I am working on the following writing assignment:
Case 3.1
Your audit senior, Quinn, is reviewing the second-quarter financial statements prepared by Holder, Inc., a
publically traded company, and thinks the client may have omitted an important item. Quinn has asked
you to research whether interim financial statements are required to include earnings per share
amounts. Prepare an email responding to Quinns question. Comment on any other potential
ramifications of Holder, Inc.s omission that come to mind, which you can offer to research. Ensure that
you use professional grammar and style
I have included my response below. I'm having trouble coming up with assumptions about the company that omitted the information and the possible ramifications. Any help is greatly appreciated. Thanks!!!!
Quinn,
You asked me to research whether interim financial statements are required to include Earnings Per Share.
ASC 260 and 270 provide guidance for reporting earnings per share on interim financial statements. The following items apply Holder, Inc.s omission.
ASC 260-10
45-7 EPS data shall be presented for all periods for which an income statement or summary of earnings is presented. If diluted EPS data are reported for at least one period, they shall be reported for all periods presented, even if they are the same amounts as basic EPS. If basic and diluted EPS are the same amount, dual presentation can be accomplished in one line on the income statement.
ASC 270-10
- Many publicly traded companies report summarized financial information at periodic interim dates in considerably less detail than that provided in annual financial statements. While this information provides more timely information than would result if complete financial statements were issued at the end of each interim period, the timeliness of presentation may be partially offset by a reduction in detail in the information provided. As a result, certain guides as to minimum disclosure are desirable. (It should be recognized that the minimum disclosures of summarized interim financial data required of publicly traded companies do not constitute a fair presentation of financial position and results of operations in conformity with generally accepted accounting principles [GAAP].) If publicly traded companies report summarized financial information at interim dates (including reports on fourth quarters), the following data should be reported, as a minimum:
a. Sales or gross revenues, provision for income taxes, extraordinary items (including related income tax effects), net income, and comprehensive income
b. Basic and diluted earnings per share data for each period presented, determined in accordance with the provisions of Topic 260
Based on the information above, Holders Inc. should report Earnings per share on their interim financial statements. Thank you for asking for my assistance with this. Please let me know if you need any additional information.