302 / 488
Chapter
26 /
Ea rnings Per Share (lAS 33)
So lution
Earnings per share
Earnings: basic earnings per share
Profit after tax
Minority interest
Preference dividend (1 year)
Appropriation
Share capital
26,000
(1,500)
(15)
-------12)
24480
293
May I, 20XO (1000 - 48 - 18)
January
I ,
20X1
February 28, 20XI
Bonus issue 1 for 4
Basic earnings per share 24,480
-i-
1,191
=
$20.6
Shares
(1/1)
934
48
18
Weight
I
4/ 12
2/ 12
934
16
_ _3
953
238
lJ..2.l
Earnings: diluted earnings per share
Profit per basic earnings per share
Interest (18 - tax 6)
Preference shares (15
+
5)
Employee remuneration (5% of 32 above)
Ordinary shares (below)
Diluted earnings per share
Dilutive/a ntidilutive
computations
Net profit from continuing operations
Taxation
Minority interest
Preference dividend, etc.
(5% x 300
=
15 plus appropriation 5)
Net profit from continuing activities
Options 18m x [(5 - 3) -;. 5] x (10 -;. 12)
10m x [(5 - 2) -;. 5] x (2 -;. 12)
Contingently issuable
Preference shares
Bonds ($18m x .67)
24,480
12
20
------U....Q)
24.5 10.4
1,370
$17.89
35,000
(8,000)
(2,000)
--.ClQ)
24980
Profit
Shares
EPS
24,980
1,191
20.97
6
I
24,980
1,198
20.85
__2
24,980
1,200
20.81
-ZQ
----l2Q
25,000
1,350
18.52
__1_2
--.ZQ
25,0 12
1,370
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.