An Exploration In The Calculation Of EPS In Reverse Aquisitions

After several-year expansion, China growth has been slowing down. The government is currently faced with industry upgrading and restructuring. It can be expected that in the near future, there will be a wave of merge and acquisition in China.Occasionally an enterprise obtains ownership of the shares of another enterprise but as part of the exchange transaction issues enough voting shares, as consideration, such that control of the combined enterprise passes to the owners of the enterprise whose shares have been acquired. This situation is described as a reverse acquisition. It is a special method for a company to be listed faster and easier than Initial Public Offering. It is more and more popular in China, which make the research more valuable.EPS is one of the most important financial indicators. Investors can use it to evaluate the profitability of a company, predict the potential growth, and make economic decisions. Since reverse acquisition is very special, the calculation of EPS in reverse acquisition deserve discussing.After studying related accounting standard and disclosure rules, the research found that there is a verbal difference between the requirements according to the CAS and SEC disclosure rules. The research testified the existence of the difference through a case study. Further discussion showed that noncontrolling interest and the change of acquirer's pre-acquisition stock number were the two driving factor that made EPS different. Furthermore, the month of acquisition date as well as the absolute value of earnings and post-acquisition weighted average stocks worked as modulator.