IFRS PRACTICAL IMPLEMENTATION GUIDE AND WORKBOOK

288

Wiley lFRS: Practical Imp lementation Guide and Workbook

Case Study 1

Facts Entity A has a profit afte r tax of $ 15 mill ion for the year ended December 3 1, 20X2. These appropria– tion s of profit have not been included in this amo unt: $m ( I) Arrears of cumulative preference dividend for 2 years ended December 31,20X2 4 (2) Ordinary dividends 5 (3) Preference share premium payable on redemption- appropriation of pro fit I (4) Exceptional profit (net of tax) 4 These share transaction s occ urred duri ng the year ended December 31, 20X2. The entit y had 3 million ordinary shares of $ 1 outstanding at January I , 20X2 :

Ordinary shares issued/purchased 250,000

Date January I

Issued at $5 per share - $1 paid to date: entitled to partici– pate in dividends to the extent paid up Full market price $3 per share issue Purchase of own shares at $3.5 per share

600,000 (400,000)

Apri l I July I

Required Calculate basic earnings per share. Solution

$m 15 4

Profit after tax plus: exceptional profit less: preference dividend (current year) preference share appropriation Profit available for ordinary shareholders

(2) en

16

Weighted-

Number of

Weighting (months)

shares ('ODD)

average ('0001

Date

3,000

3,000

III/X2 1/lIX2 4/1IX2 7/1IX2

I I

(250 x 1/5)

50

450

600

9/12 6/12

(400)

(200)

3,300

(' 0001

$485

16,000/3,300

Basic earnings per share

Case Study 2

Facts A had two -for -one share split on Dec ember 31, 20X2, in which two shares were awarded for every share held, and in 20XI there wa s a reported basic earnings per share of $3.30. Required Show the effect on the basic earnings per share calcu lated in Case Stud y I and the previous year' s basic earnings per share. State the effec t on your answer if the shar e split had occ urred on February I , 20X 3, before the approval of the finan cial statements for the year ended Dec emb er 3 1 20X2. Solution

$3.30 x 1/3 16,000

20X2: 20XI:

$1.10 $1.62

Basic earnings per share Basic earnings per share

=

(3,300 + 3,300 x 2) If the share split had occurred on February I, 20X3, then this would still have been taken into account in the calculation, as such events after the ba lance sheet date should be adjusted retrospectively (lAS 33, paragraph 64).