Question

Explain

1 * Does GAAP have ethical implications or are they just a set of reporting standards?

2 * What is earnings per share?

Answer 1

GAPP just a set of reporting standards.

But, need ethical implications in accounting.

At the core of accounting ethics is the strict adherence -- as much as is possible -- to generally accepted accounting principles (GAAP). These are the basic rules of accounting laid out by the Financial Accounting Standards Board, and their use ensures the reliability, comparability and integrity of financial statements. In some rare cases, business circumstances may require diversions from GAAP. In these situations, accounting ethics require that any departures are fully documented and clearly justified for investors or others reading the resulting financial statements.

Earning per Share

Earnings per share or EPS is a fundamental measure of the health and profitability of any corporation. The EPS figure answers this important question: for each stock share of the business, what was the reported profit?

The Earnings per Share (EPS) Calculation

The basic earnings per share calculation is quite simple. It's simply the total net income available to common shareholders, divided by the total number of common shares outstanding.

Earnings per share (EPS) = Net Income Available to Common Shareholders/Number of Common Shares Outstanding

Net income as it's used here and in almost all financial calculations is defined as the sum of all revenues less all costs, including operational and management expenses, depreciation, interest, taxes, and dividends paid on preferred shares.

Unless specified otherwise, it's assumed that all relevant data, including EPS, are for the company's fiscal year -- which may or may not start on January 1. It's also customary to subtract from net income all non-cumulative preferred stock dividends declared (whether or not paid during the fiscal period) and the after-tax total of preferred stock dividends.

The number of common shares outstanding figure is more accurately based on a weighted average of the common shares outstanding since the total shares figure changes over the course of the year for most publicly traded corporations.