Earnings Per Share

Bonus element
160
Element of issuing shares at ex-right price 400*$1.5/$2.5=
240
400
31 Dec
31 Dec
20ቤተ መጻሕፍቲ ባይዱ7 1 July 20x8
800
960 restated
1200
Continued
• BEPS(2008)=550/ 1080= 50.9c
• Not to examine
–Two or more kinds of potential ordinary shares exist at the reporting date.
–Anti-dilutive
11
Continued
• Adjust the income for the effect, net of tax of:
(b) any right recognized in the period to exercise stock with potential dilutive effect, and
(c) any other change in income or expenses in the period that would result from the conversion of potential ordinary shares with a dilutive effect.
12
Continued
• Adjust the number by
–adding the weighted average number of ordinary shares that would be issued in case of making all potential ordinary shares with effect dilutive ordinary shares.
IAS33 Earnings Per Share
Syllabus C11g
2
EPS = ① / ②
① Net profit or loss attributable to ordinary shareholders
Net profit or loss（excluding income tax and non-controlling interest）X
(a) the amount of dividends or other items associated with potential ordinary shares with dilutive effect that has been deducted to obtain the result for the period;
16
Convertible bonds _Example 5, p423
• Preferred dividends = $50 • DEPS(2002)=(700-50+70)/ 5550= 13.0c
– Max. number of shares convertible= (1250/100)*124=1550 – WANOSO(2002) = 4000+1550 = 5550 – After-tax interest on bonds = 1250*8%*(1-30%)=70 • DEPS(2001)=(641.773-50+52.5)/ 5162.5= 12.5c – WANOSO(2001) = 4000*1/4+5550*3/4 = 5162.5 – After-tax interest on bonds = 70*3/4 =52.5
Number of shares issued for no consideration = number of shares exercised － number of shares which could have been purchased at fair value (average price) by the consideration payable
–It is considered that the alleged amounts of options and warrants, to proceed with the issuance of common shares are equal to the average market price during the same period.
15
Continued
Potential ordinary shares
Convertible loan stock
Convertible preferred shares
Adjustment for earnings
After-tax interest from the date of issue to the end of period
• Bonus issue 1 for 5 => Adjusting factor=5/6
($000)
• BEPS(2008)=550/ 1200= 45.8c
• BEPS(2007)
①=460/ 1200 = 38.3c Restated number=1000*6/5=1200
②=46c *(5/6) = 38.3c EPS before bonus issue=460/ 1000=46c
Less：irredeemable preferred share dividends
（X）
X
② Weighted average number of ordinary shares outstanding during the period
total number of shares outstanding * time-weighting factor
–Potential ordinary shares with dilutive effect is understood to have been converted into ordinary shares at beginning of period or, if later, at the date of issue of potential ordinary shares.
–Adjusting factor =$2.5/$3 or = 800/960 =5/6
Test 3,p421
10
Diluted EPS
• Considering the potential effect of potential ordinary shares
–Convertible loan notes –Convertible preferred stock –Options or warrants
($000)
–WANOSO = 1/2* (960+1200) =1080
• BEPS(2007)
①=460/ 960 = 47.9c
–Restated number=800+160 or =800*$3/$2.5=960
②=57.5c *(5/6) = 47.9c
–EPS before right issue = 460/ 800=57.5c
Preferred dividends
Options and warrants
Nil
Adjustment for number of shares Retrospective to the issue date of potential ordinary shares
Maximum number of shares issuable according to conversion ratio
number of shares actually change
① + Issue of shares at full market price
② + Bonus issue (Stock dividends)
③ + Right issue
a) Bonus element
b) Element of issuing shares at ex-right price ④ + Issue share to acquire subsidiaries ⑤ +Actual conversion of convertible loan stock or convertible
preferred shares ⑥ +Actual exercise of options or warrants
⑦ + Share split ⑧ - Reverse share split
⑨ - Redemption and repurchase of shares
6
Issue of shares at full market price _Example 1, p415
• BEPS(2007)=460/800 = 57.5c
($000)
• BEPS(2008)=550/ 900= 61.1c
–WANOSO = 1/2* (800+1000) =900
31 Dec 20x7
31 Dec 1 July 20x8
800
1000
Test 1,p416
7
Bonus issue _Example 3, p417
1.1 1000
6/12 =500
7.1 1200
3/12 =300
10.1 900
3/12 =225
1025 shares
Or 1000 + 200*6/12 – 300*3/12 = 1025 shares
3
Basic EPS
• Not considering the potential effect of potential ordinary shares • Denominator should be adjusted for the events that make the
13
Continued
–The number of shares to be issued by the conversion of potential ordinary shares with dilutive effect will be determined depending on the conditions of potential ordinary shares. Where there is more than a base for conversion, will be used in calculating the exchange ratio or exercise price more advantageous to the holder of potential ordinary shares.
31 Dec 20x7
31 Dec 1 July 20x8
1000
1200
1200
restated
Test 2,p418
8
Right issue _Example 4, p419
• Right issue 1 for 2 , Exercise price=$1.5 • Cum right price=$3 => Ex-right price=(2*$3+1*$1.5)/(2+1)=$2.5
14
Continued
–The difference between ①the number of common shares issued and ②the number of shares that were issued to the average market price of ordinary shares during the period, is treated as③ an issue of ordinary shares gratuitously. • These shares ② are presumed to be reasonably valued and have no dilutive effect or anti-dilusive are ignored in calculating DEPS. • These shares ③ do not generate any income and have no effect on the result for the period. Therefore, these shares are dilutive effect and added to the number of shares outstanding for calculating DEPS.