Net Income Avail to Common, GAAP
NetIncomeLossAvailableToCommonStockholdersBasicNetIncomeLossAvailableToCommonStockholdersDilutedNet income available to common shareholders is the part of a company's net income that belongs to its common stockholders after every prior claim on earnings has been deducted. It starts from net income attributable to the parent and subtracts preferred dividends and other amounts owed to holders of senior or participating securities.
It is the numerator of basic earnings per share, which makes it the most direct measure of what the period's profit means for common shareholders.
The calculation is set by ASC 260, Earnings Per Share, and the result is tagged in XBRL as NetIncomeLossAvailableToCommonStockholdersBasic. The SEC's element definition describes it as income after taxes, noncontrolling interests, preferred dividends, and amounts allocated to participating securities. A diluted version, NetIncomeLossAvailableToCommonStockholdersDiluted, adds back items such as interest on convertible debt that would disappear if the securities converted. Regulation S-X Rule 5-03.25 calls for the resulting earnings per share on the income statement.
Preferred dividends are the main deduction. For cumulative preferred stock, the period's dividend is subtracted whether or not the board declared it, because it accumulates as a claim ahead of common shareholders. For non-cumulative preferred, only declared dividends are subtracted. Other deductions can include premiums paid to redeem preferred stock above its carrying value, accretion of redeemable securities toward their redemption amount, and earnings allocated to participating securities such as certain unvested share awards under the two-class method.
For companies with no preferred stock or participating securities, this figure equals net income attributable to the parent. The gap matters for banks, utilities, real estate investment trusts, and companies that raised capital through preferred or convertible preferred stock. Profitability ratios aimed at common shareholders, such as return on common equity and price to earnings, should use this figure rather than total net income.
A: Net income available to common subtracts preferred dividends and other claims senior to common stock. The two are equal for companies with no preferred or participating securities.
A: For cumulative preferred stock, yes. The period's dividend is deducted whether or not it was declared, because it remains owed to preferred holders before common shareholders.
A: EPS measures earnings per common share. Only the income that belongs to common shareholders should be divided by the common share count, so claims of other security holders are removed first.
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