IFRS PRACTICAL IMPLEMENTATION GUIDE AND WORKBOOK

294

Wiley lFRS: Practicallmplementation Guide and Workbook

(e) The amount of the profit receivable by employees will change when the profit adjustments re– garding the preference shares and the convertible bonds are used in the calculation of diluted earnings per share.

Case Study 7

$33 million 10 million Facts An entity issues 4 million convertible bonds at January I, 20X!. The bonds mature in three years and are issued at their face value of $10. The bonds attract interest arrears. Each bond can be converted into two ordinary shares. The company can settle the principal amount of the bonds in ordinary shares or in cash. When the bonds are issued, the interest rate for a similar debt without the conversion rights is 10%. At the issue date the market price of an ordinary share is $4. Ignore taxation. The company is likely to settle the contract by issuing shares. Profit attributable to ordinary shareholders to December 31, 20X I Ordinary shares outstanding Allocation ofproceeds ofbond Liabilit y Equity Total Required Calculate basic and diluted earnings per share for the year to December 31, 20X!. Solution $30 million $10 million $40 million An entity who se securities are traded on a securities exchange or that is in process of public issuance) must present, on the face of the income statement, basic and diluted earnings per share for [lAS 33.66] o Profit or loss from continuing operations attributable to the ordinary equity holders of the parent entity; and o Profit or loss attributable to the ordinary equity holders of the parent entity for the period for each cla ss of ordinary shares that has a different right to share in profit for the period. 8.2 Basic and diluted earnings per share must be presented with equal prominence for all periods pre sented. [lAS 33.66] 8.3 Basic and diluted EPS must be pre sented even if the amounts are negative (that is, a loss per share). [lAS 33.69] 8.4 If an entity reports a discontinued operation, basic and diluted amounts per share must be disclosed for the discontinued operation either on the face of the income statement or in the note s to the financial statements. [lAS 33.68] 9. DISCLOSURES o Basic and diliuted earnings pe r share should be presented on the face of the income statement for each clas s of ordinary shares. o If an entity reports a discontinued operation, it should report the basic and diluted amounts per share for the discontinued operation. o An entity should report basic and diluted earn ings per shar e even if it is a loss per share. o The amo unts used as the numerators in calculating basic and diluted EPS , and reconciliation of those amounts to profit or loss attributable to the parent for the period. o Th e weighted-average number of ordinary shares used as the denominator in calculating ba– sic and diluted EPS , and a reconciliation of these denominators to each other. o Basic and diluted earnings per share are presented with equal prominence. Basic EPS Diluted EPS $33 million 10 million $(33 + interest 10% of $30 million ) 10 million + 8 million $36 million 18 million = $2 8. PRESENTATION 8.1