When should the dilutive effect of contingently convertible instruments be included in diluted earnings per share computations?
Contingently convertible instruments should be included in diluted earnings per share (if dilutive) regardless of whether the market price trigger has been met. The Committee observed that there is no substantive economic difference between contingently convertible instruments and conventional convertible instruments with a market price conversion premium. Accordingly, the Committee concluded that the treatment for diluted earnings per share should not differ because of a contingent market price trigger. The Committee also agreed that the consensus should be applied to instruments that have multiple contingencies if one of the contingencies is a market price trigger and the instrument is convertible or settleable in shares based on meeting a market condition that is, the conversion is not dependent (or no longer dependent) on a substantive non-market-based contingency. For example, if an instrument is convertible upon meeting a market price trigger or a substantive non-market-based con
