This week the Financial Accounting Standards Board (FASB) announced its proposed Staff Position on FAS 128-a, Computational Guidance for Computing Diluted EPS [earnings per share] under the Two-Class Method. “The existing literature provides clear examples of the application of the two-class method in computing basic EPS,” says the FASB proposed statement, with emphasis in the original, “but does not specifically address or illustrate the application of the two-class method in computing diluted EPS. As a result, questions have been raised about computing diluted EPS when an entity has common stock, participating securities, and potential common stock.”

The Staff Position proposes to answer these questions under a specific, three-step process. To read the FSP FAS 128-a, click here; comments are requested by March 27, 2007.