Page 50 - SWGas Annual Report 2015

Earnings Per Share. Basic earnings per share (“EPS”) are calculated by dividing net income attributable to
Southwest Gas Corporation by the weighted-average number of shares outstanding during the period. Diluted EPS
includes additional weighted-average common stock equivalents (stock options, performance shares, and
restricted stock units). Unless otherwise noted, the term “Earnings Per Share” refers to Basic EPS. A reconciliation
of the denominator used in the Basic and Diluted EPS calculations is shown in the following table.

(In thousands) 2015 2014 2013
Average basic shares
Effect of dilutive securities: 46,992 46,494 46,318

Stock options 8 17 26
Performance shares 171 215 231
Restricted stock units 212 218 183
47,383 46,944 46,758
Average diluted shares

Recently Issued Accounting Standards Updates. In May 2014, the Financial Accounting Standards Board (“FASB”)
issued the update “Revenue from Contracts with Customers (Topic 606).” The update replaces much of the current
guidance regarding revenue recognition including most industry-specific guidance. In accordance with the update,
an entity will be required to identify the contract with a customer, identify the performance obligations in the
contract, determine the transaction price, allocate the transaction price to the performance obligations in the
contract, and recognize revenue when (or as) the entity satisfies a performance obligation. In addition to the new
revenue recognition requirements, entities will be required to disclose sufficient information to enable users of
financial statements to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising
from contracts with customers. Entities may choose between two retrospective transition methods when applying
the update. In April 2015, the FASB voted to propose, and in July 2015 it approved, a one-year deferral of the
effective date (annual periods beginning after December 15, 2017), but to permit entities to adopt one year earlier if
they choose (i.e., the original effective date). The FASB decided, based on its outreach to various stakeholders and
the forthcoming exposure drafts, which amend the update, that a deferral is necessary to provide adequate time to
effectively implement the update. The Company plans to adopt the update at the required adoption date, which is
for interim and annual reporting periods commencing January 1, 2018. The Company is evaluating what impact this
update might have on its consolidated financial statements and disclosures.

In August 2014, the FASB issued the update “Disclosure of Uncertainties about an Entity’s Ability to Continue as a
Going Concern,” which requires management to assess a company’s ability to continue as a going concern and to
provide related footnote disclosures in certain circumstances. Under the update, disclosures are required when
conditions give rise to substantial doubt about a company’s ability to continue as a going concern within one year
from the financial statement issuance date. The update is effective for the annual period ending after
December 15, 2016, and all annual and interim periods thereafter. This update and changes thereto are not
expected to have a material impact on the Company’s disclosures.

In April 2015, the FASB issued the update “Interest—Imputation of Interest (Subtopic 835-30) Simplifying the
Presentation of Debt Issuance Costs.” To simplify presentation of debt issuance costs, the amendments in this
update require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as
a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. While balance
sheet presentation is impacted by the update, the recognition and measurement of debt issuance costs are not.

Southwest Gas Corporation