to dilute or not to dilute
.11 Verizon 19:36 us-dfdtn-16-4-case-to-dilute-or-not-to-dilute.pdf www2.deloitte.com Case 164 Te Dilute er Net to Dilute Performance Apparel Inc. (PA) is a retailer od sports apparel and Sootwear. PAs | operations arc based Beaverton, Oregon, with retail stores located through the country, In an effort to motivate certain members of senioe manapement to cxecute consistently with PA's long-term financial perfoemance plan, it decided to issue perfommance-based restricted stock units (RSUs) on January 1.2014 RSUs are a form of compensation offcred by an employer in the form of company stock These shares of company stock are "restricted" in that they vest only afier certain conditions (restriction) are met The shares are carnod or "Yested" basod on a vesting schedule consistent with the satisfaction of these conditions Vesting schedules are specific to cach award and can be based on various conditsions sach as service (remaining with the mployer for a certain pcriod of timc), performance milestones(uch as mocting sales goals). or a combination These RSUs cliff vest (shares vest at a point in time) on the basis of continusd employment afler three ycars, with the number of RSUs carned and issand at the and of the three-year vesting period, if any, dependent en two perfoemance conditions . Three-ycar averape organic revenue growth 2. Three-year average operating marg Since PA has not previously issued these types of awards, it does nmot have knowledge of the relevant accounting literature and guidance en how these ceatingendy suable shares Accordingly, as PA's extemal auditor, manapement has asked for your assistance with its financial statements as of and for the year ended December 31, 2014 should be accoumed for in their dilused eanings per share (EPS) calculation As of December 31, 284 . What is the three-year averape erpanic growth rate that PA should assume in desermining the number of potentially outstanding dilutive awards for purposes of calculating diuted EPS 2. What is the three-year average operating margm that PA should assume desermining the number of potentially outstanding dilutive awards for purposes of calculating diluted EPS? Foe the year ended December 31, 2014, organic revenue increased 10 percent For the year ended December 31, 2014, the operating margin was 40 percent Foe the year ended December 31, 2014, organic revenue incrcased 20 percet on averape the previous three years Foe the year ended December 31,2014, the operating margin was S0 percent on averape the previous three ycars G .11 Verizon 19:36 us-dfdtn-16-4-case-to-dilute-or-not-to-dilute.pdf www2.deloitte.com Case 164 Te Dilute er Net to Dilute Performance Apparel Inc. (PA) is a retailer od sports apparel and Sootwear. PAs | operations arc based Beaverton, Oregon, with retail stores located through the country, In an effort to motivate certain members of senioe manapement to cxecute consistently with PA's long-term financial perfoemance plan, it decided to issue perfommance-based restricted stock units (RSUs) on January 1.2014 RSUs are a form of compensation offcred by an employer in the form of company stock These shares of company stock are "restricted" in that they vest only afier certain conditions (restriction) are met The shares are carnod or "Yested" basod on a vesting schedule consistent with the satisfaction of these conditions Vesting schedules are specific to cach award and can be based on various conditsions sach as service (remaining with the mployer for a certain pcriod of timc), performance milestones(uch as mocting sales goals). or a combination These RSUs cliff vest (shares vest at a point in time) on the basis of continusd employment afler three ycars, with the number of RSUs carned and issand at the and of the three-year vesting period, if any, dependent en two perfoemance conditions . Three-ycar averape organic revenue growth 2. Three-year average operating marg Since PA has not previously issued these types of awards, it does nmot have knowledge of the relevant accounting literature and guidance en how these ceatingendy suable shares Accordingly, as PA's extemal auditor, manapement has asked for your assistance with its financial statements as of and for the year ended December 31, 2014 should be accoumed for in their dilused eanings per share (EPS) calculation As of December 31, 284 . What is the three-year averape erpanic growth rate that PA should assume in desermining the number of potentially outstanding dilutive awards for purposes of calculating diuted EPS 2. What is the three-year average operating margm that PA should assume desermining the number of potentially outstanding dilutive awards for purposes of calculating diluted EPS? Foe the year ended December 31, 2014, organic revenue increased 10 percent For the year ended December 31, 2014, the operating margin was 40 percent Foe the year ended December 31, 2014, organic revenue incrcased 20 percet on averape the previous three years Foe the year ended December 31,2014, the operating margin was S0 percent on averape the previous three ycars G
