Response to the FASB Prospectus "Earnings Per Share"

Abstract This article focuses on the response of American Accounting Association's Financial Accounting Standards Committee on earnings per share. The Committee supports the Financial Accounting Standards Board adding a limited scope project to its agenda that would eliminate the requirements to calculate primary earnings per share (PEPS) and adopt the basic/fully diluted approach to reporting earnings per share. The Committee does not, however, support the Board beginning a full reconsideration of all aspects of earnings per share. the Committee urges the Board to consider whether an earnings per share project can be completed on a limited scope basis before adding it to its agenda. If the Board is uncertain whether it can complete the project on a limited scope basis, our advice is to forego the project at the present time. The Committee considers international comparability an important but not overriding consideration for the Board in its decision process. Accounting standards must reflect the characteristics of the economic system in which they are used.