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$33 million
10 million
$30 million
$10 million
$40 million
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
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
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
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
Basic and diluted earnings per share are presented with equal prominence.
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.