I read on the curriculum saying that when calculating the diluted EPS with convertible debt, the convertible shall be treated as the debt had been converted at the bgn of the period.
What I’m confused is whether the “period” refer to the whole fiscal year or the period starting at the issuance of the convertible debt.
For example, the XXX company has an outstanding common stock of 500,000 shares at the begining of the year. On July the 1st, the company issued a 1000 convertible bond at par with each able to be converted into 10 share of common stock. So should the denominator used in calculating the diluted EPS be 500,000+1,000x10=510,000 or 500,000 + 1,000 x 10 x 6/12months = 505,000?
Thanks for help!