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Wiley lFRS: Practical Imp lementation Guide and Workbook
Case
Study 1
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
Date
January
I
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
Required
Calculate basic earnings per share.
Solution
Profit after tax
plus: exceptional profit
less: preference dividend (current year)
preference share appropriation
Profit available for ordinary shareholders
$m
15
4
(2)
en
16
Number of
Weighting
Weighted-
Date
shares
('ODD)
(months)
average ('0001
III/X2
3,000
I
3,000
1/lIX2
(250
x
1/5)
I
50
4/1IX2
600
9/12
450
7/1IX2
(400)
6/12
(200)
3,300
(' 0001
Basic earnings per share
16,000/3,300
$485
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
$1.10
$1.62
=
$3.30 x 1/3
16,000
Basic earnings per share
Basic earnings per share
20X2:
20XI:
(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).