IFRS PRACTICAL IMPLEMENTATION GUIDE AND WORKBOOK

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Wiley IFRS: Practical Implementation Guide and Workbook

Therefore shares for "no consideration" (2 million - 1.5 million )

(0.5million)

Diluted earnings per share $3 million O 5 '11' I . rm IOn

= 20c per share

7.11 Any potential ordinary shares that expired or were canceled are included in the diluted earnings per share calculation for the period in which they were outstanding. Thus share options that lapsed during the period would be included in the calculation and weighted for the period they were outstanding. 7.12 Potential ordinary shares are dilutive if their deemed conversion to ordinary shares would decrease net profit per share from continuing ordinary operations. Thus the "control number" is the net profit from continuing operations. It is the effect of potential ordinary shares on this "number" that determines whether the issue of potential ordinary shares is dilutive or antidilutive. 7.13 The effects of all antidilutive potential ordinary shares are ignored in the calculation of diluted earnings per share. Each issue of potential ordinary shares is considered individually in the order most dilutive to least dilutive. Net profit from continuing operations is the net profit from ordinary activities after deducting preference dividends and after excluding items relating to discontinued operations.

Case Study 6

Facts Extracts from group financial statements of AB, a public limited company, year ended April 30, 20XI. :Jim 35,000

Profit fromcontinuing operations Losson discontinued operations (taxrelief$500million) Income tax Minority interest (loss on discontinued activities $500million) Preference share appropriation-dividend (2 years) -other

(1,500) (7.500) (1,500) (30) (5)

Share capital at April 30, 20XI Ordinary sharesof $1

1,000 300

5%Convertible preference shares

Other Information (a) On January I, 20XI , 48 million ordinary shares were issued on the acquisition of CD pic at a valuation of $190 million. If CD earns cumulative profits in excess of $8,000 million up to April 30, 20X2, an additional 10 million shares are issuable to the vendors. If the profits do not reach that amount, then only 2 million shares are issuable on April 30, 20X2. (b) The profits for the three months to April 30, 20X I, are $1,200 million. (c) On May II , 20XI, there was a bonus issue of one for four ordinary shares. The financial state– ments are made up to April 30, 20XI, and had not yet been published. (d) The company has a share option scheme. The directors exercised options relating to 18 million shares on February 28, 20XI, at a price of $3 per share . In addition, options were granted dur– ing the year on March I, 20X I, to subscribe for 10 million shares at $2 each. The fair value of the shares on March 1, 20X I, was $4, and the average fair value for the year was $5. (e) The preference shares are convertible into ordinary shares on May I, 20X2, on the basis of one ordinary share for every two preference shares or on May 1, 20X3, on the basis of one ordinary share for every four preference shares. (f) There is a profit share scheme in operation whereby employees receive a bonus of 5% of profits from continuing operations after tax and preference dividends. (g) XY pic, a 100% owned subsidiary of AB, has in issue 9% convertible bonds of $200 million that can be converted into one ordinary share of AB for every $10 worth of bonds. Income tax is levied at 33%. Required Calculate basic and diluted earnings per share.