A portion of Note 2: Earnings per Share from Facebook, lnc.'s 10-K is as follows: 

a. Explain why employee stock options and restricted stock units are adjustments to the denominator for diluted EPS.

b. Facebook computes EPS separately for its Class B shares (not shown here) and states that the computation of the diluted EPS for its Class A stock assumes the conversion of its Class B common stock to Class A common stock. Based on the table above, what were the effects of the assumed conversion?

Transcribed Image Text:

2018 2017 Class A Stock Class A Stock Basic EPS: Numerator Net income attributable to common shareholders. $18.410 $13,022 Denominator Weighted ave, shares outstanding.. Less: Shares subject to repurchase. Number of shares used for basic EPS calculation Basic EPS...... 2,406 2,375 2 2,406 2,373 $ 7.65 $ 5.49 Diluted EPS: Numerator Net income attributable to common shareholders..... Reallocation of income attributable to participating securities. $18,410 $13,022 1 14 Reallocation of net income as a result of conversion of Class B lo Class A common stock.... Net income altributable to common shareholders for diluted EPS.... 3,701 2,898 $22,112 $15,934 Denominator Number of shares used for basic EPS computation ... Conversion of Class B to Class A common stock. 2,406 2,373 484 528 Weighted average effect of dilutive securities: Employee stock options. RSUS... 2 29 49 Shares subject to repurchase and other. 2 | Number of shares used for diluted EPS computation. Diluted EPS .. 2,921 2,956 $ 7.57 $ 5.39