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Earnings per share for a quarter should be based on the weighted average number of shares of common stock and dilutive potential common shares outstanding during that quarter, rather than calculated as the difference between year-to-date earnings per share and cumulative earnings per share for previous quarters of the fiscal year. When performing year-to-date computations for the treasury stock method, the reporting entity does not perform the year-to-date computation independently using the whole year as the averaging period; rather, it is an average of the quarters’ weighted average incremental shares under the treasury stock method. For the purpose of determining the weighted average number of shares in applying the treasury stock method to year-to-date computations, reporting entities should use the guidance in ASC 260-10-55-3.

Excerpt from ASC 260-10-55-3

…the number of incremental shares to be included in the denominator shall be determined by computing a year-to-date weighted average of the number of incremental shares included in each quarterly diluted EPS computation.

However, in computing year-to-date diluted EPS, reporting entities should use year-to-date income (or loss) from continuing operations as the basis for determining whether or not dilutive potential common shares not included (or included) in one or more quarterly computations of diluted EPS are included in the year-to-date computation.
For example, if a reporting entity had a year-to-date loss from continuing operations that included quarters with income, any incremental shares included in the quarters with income would not be included in the denominator for the year-to-date diluted EPS computation, and vice versa.
Disclosure in the annual report of the quarterly per share data required by S-K 302 should reflect the average shares outstanding during each particular quarter. If the sum of such quarterly EPS amounts differs significantly from annual EPS, the reason for the difference should be explained in a note to the quarterly financial data included in the annual report.
See ASC 260-10-55-3A, Example 1 in ASC 260-10-55-38 through ASC 260-10-55-50, and Example 12 in ASC 260-10-55-85 for an illustration of this concept.

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