IFRS PRACTICAL IMPLEMENTATION GUIDE AND WORKBOOK

Chapter 26 / Ea rnings Per Share (lAS 33)

293

So lution Earnings per share

Earnings: basic earnings per share Profit after tax Minority interest Preference dividend (1 year)

26,000 (1,500) (15) -------12) 24480

Appropriation Share capital

Shares (1/1) 934 48 18

Weight I

934 16 _ _3 953 238 lJ..2.l

May I, 20XO (1000 - 48 - 18) January I , 20X1 February 28, 20XI

4/ 12 2/ 12

Bonus issue 1 for 4

Basic earnings per share 24,480 -i- 1,191 = $20.6

Earnings: diluted earnings per share Profit per basic earnings per share Interest (18 - tax 6) Preference shares (15 + 5)

24,480 12 20

Employee remuneration (5% of 32 above)

------U....Q) 24.5 10.4 1,370 $17.89

Ordinary shares (below) Diluted earnings per share

Dilutive/a ntidilutive computations

35,000 (8,000) (2,000)

Net profit from continuing operations Taxation Minority interest Preference dividend, etc. (5% x 300 = 15 plus appropriation 5)

--.ClQ) 24980

Profit 24,980

Shares

EPS

Net profit from continuing activities Options 18m x [(5 - 3) -;. 5] x (10 -;. 12) 10m x [(5 - 2) -;. 5] x (2 -;. 12)

1,191

20.97

6 I

24,980

1,198 __2 1,200 ----l2Q 1,350 --.ZQ 1,370

20.85

Contingently issuable

24,980 -ZQ 25,000 __1_2 25,0 12

20.81

Preference shares

18.52

Bonds ($18m x .67)

18.25

Therefore, all issues are dilutive and are rank ed from the most to the least dilutive. Explanatory No tes

(a) Continge ntly issuable shares. The target profit of $8 ,000 million and the to tal to date is on ly $1 ,200 million. Therefore, the number of shares to be included is the number issuable if the cur– rent year-end were the end of the contingency period. If this were the case, then the profits had not reached the target and only 2 million shares were issuable . (b) Bonu s issue. Even though the bonu s issue was after the peri od end, the financial statements have not yet been publi shed . Thi s fact is taken into account in ca lculating basic and di luted earnings per share. (c) Share options. Th e options exercised are incl uded in basic ea rn ings per share (and thu s diluted earnings per share) from the date exercised. Up to the date exe rcised (February 28, 20X I) , they are incl uded in diluted earnings per share onl y. In calculating the shares issued for no consid– eration, the average fair value is used , not the current value of the sha re. (d) Pref erence shares. The most advantageous con version rate is used , whi ch is one ordinary sha re for every two preference shares.