IFRS PRACTICAL IMPLEMENTATION GUIDE AND WORKBOOK

Chapter 26 / Earnings Per Share (lAS 33)

297

(a) Net profit after taxation (including discon– tinued operations). (b) Net profit from continuing oper ations. (c) Net profit before tax (including discontinued operations). (d) Retained profit for the year after dividend s. Answe r : (b) 7. Potent ial ordinary shares issued by a subsidiary should be included in the diluted EPS calculation as they could potentia lly have an impact on the net profit for the period and the number of shares to be included in the calculation.

MULTIPLE-CHOICE QUESTIONS 1. Entity A has an ordinary "A" class, nonvoting share , which is entitled to a fixed dividend of 6% per ann um. The "A" class ordinary share will (a) Be included in the "per share" calculation after adjustment for the fixed dividend. (b) Be included in the "per share" calc ulation for EPS without adjustment for the fixed dividend . (c) Not be included in the "per share" calcula– tion for EPS. (d) Be included in the calculation of diluted EPS. Answer: (c) 2. Earnings per share is calculated before account– ina for which of the following items? "' (a) Preference dividend for the period. (b) Ordinary dividend . (c) Taxation. (d) Minorit y interest. Answer: (b) 3. Ordinary shares issued as part of a business com– bination are included in the EPS calculation in the case of the "purchase" method from (a) The beginning of the accounting period. (b) The date of acquisition. Answer: (b) 4. When an enterprise makes a bonus issue/stock split/stock dividend or a rights issue, then . (a) The previous year's EPS is not adjusted for the issue. (b) The previous year' s EPS is adjusted for the Issue. (c) Only a note of the effect on the previous year ' s EPS is made. (d) Only the diluted EPS for the previous year is adjusted. Answe r : (b) 5. If a stock option is converted on March 31, 20X l, then (a) The potential ordinary shares (stock option) are included in diluted EPS up to March 3 I, 20X1, and in basic EPS from the date con– verted to the year-end (both weighted ac– cording ly). (b) The ordinary shares are not included in the diluted EPS calculati on but are included in basic EPS. (c) The ordinary shares are not included in the basic EPS but are included in diluted EPS. (d) The effects of the stock option are included only in previous year's EPS calculation. Answer : (a) 6. In calculating whether potential ordinary shares are dilutive, the profit figure used as the "co ntrol number" is (c) The end of the accounting period. (d) The midpoint of the accounting year.

(a) True (b) False

Answe r : (a ) 8. An enterprise need disclose diluted EPS only if it differs from basic EPS by a material amount.

(a) True (b) False

Answer : (b) 9. If a bonus issue occurs between the year-end and the date that the financ ial statements are authorized, then (a) EPS both for the current and the previo us year are adjusted. (b) EPS for the current year only is adjusted. Answer : (a) 10. If a new issue of shares for cash is made between the year-end and the date that the financial statements are authorized, then (a) EPS for both the current and the previous year are adjusted. (b) EPS for the current year only is adj usted. Answer: (c) 11. The weighted average number of shares out– standing during the period for all periods (other than the conversion of potential ordinary shares) shall be adj usted for (a) Any change in the number of ordinary shares without a change in resource s. (b) Any prior-year adj ustment. (c) Any new issue of shares for cash. (d) Any convertib le instruments settled in cash. Answer : (a) (c) No adj ustment is made to EPS. (d) Diluted EPS only is adj usted. (c) No adj ustment is made to EPS . (d) Diluted EPS only is adj usted.