Diluted Weighted Avg Shares
WeightedAverageNumberOfDilutedSharesOutstandingWeightedAverageNumberDilutedSharesOutstandingAdjustmentIncrementalCommonSharesAttributableToShareBasedPaymentArrangementsDiluted weighted average shares outstanding is the basic weighted average share count plus the additional common shares that would exist if a company's dilutive securities, such as stock options, warrants, restricted stock units, and convertible debt or preferred stock, had been turned into common stock. It is the denominator of diluted earnings per share.
It answers a conservative question: how much of the period's earnings would each share represent if every security that could reasonably become common stock already had?
The rules are in ASC 260, Earnings Per Share, and the result is tagged in XBRL as WeightedAverageNumberOfDilutedSharesOutstanding. The difference from the basic count is tagged WeightedAverageNumberDilutedSharesOutstandingAdjustment, and the part coming from stock compensation is often shown as IncrementalCommonSharesAttributableToShareBasedPaymentArrangements.
Options and warrants are added using the treasury stock method. It assumes they are exercised and the proceeds are used to buy back shares at the average market price, so only the net new shares count, and only when the options are in the money. Convertible securities use the if-converted method: the shares they would convert into are added, and the related interest or preferred dividends are added back to the numerator. A security is left out entirely if including it would raise earnings per share. Such securities are called antidilutive and are disclosed separately.
This antidilution rule has a practical consequence. When a company reports a loss from continuing operations, adding shares would make the loss per share smaller, so diluted shares equal basic shares for that period. A company that swings from loss to profit can therefore show a jump in its diluted count with no new issuance. The gap between basic and diluted counts is a quick gauge of how much stock-based pay and convertible financing weigh on existing shareholders.
A: Basic shares count only stock actually outstanding. Diluted shares also include the net shares that options, warrants, RSUs, and convertibles would create, as long as including them lowers earnings per share.
A: Adding shares to a loss would shrink the loss per share, which is antidilutive. ASC 260 excludes antidilutive securities, so the two counts are the same.
A: No. Under the treasury stock method, options with an exercise price above the average market price would produce no net new shares, so they are excluded as antidilutive.
In the metrics library: Diluted Earnings Per Share (EPS)
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