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If conversion is contingent on BOTH future earnings AND future share market price, contingently issuable shares are included in the diluted EPS calculation:
ANever included
BOnly if BOTH conditions are met (earnings to date AND current market price at reporting date)
CAlways included from contract inception
DIf either condition is met based on year-to-date data
Answer & Solution
Correct answer: B. Only if BOTH conditions are met (earnings to date AND current market price at reporting date)
When multiple contingencies must coexist for shares to issue, diluted EPS treats them as outstanding only if all conditions would be considered met at reporting date. If either fails, the shares are excluded. Basic EPS waits for actual full satisfaction at the end of the contingency period.
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