14. Group Accounts - Additional Disclosure

Question 1

What is a related party?

Answer 1

A person or entity that is related to the reporting entity (has significant influence or control)

Question 2

According to IAS24, which related party transactions should be disclosed?

Answer 2

ALL of them, including those for zero cost, below market rate and at arms length

Question 3

When is a person counted as a related party?

Answer 3

• Control or joint control of the entity
• Significant influence over the entity
• Member of key management personnel of the entity or parent (director level)
• Close family member (children or spouse) of the above

Question 4

When is an entity counted as a related party?

Answer 4

• Parent and sub/ass/JV
• Two subs of the same parent
• Two JVs of the same parent
• NOT two associates of the same parent
• Post employment benefit plan for employees of the entity
• Entity is controlled by a related person
• A controlling person has significant influence over the other entity

Question 5

What is the calculation for basic Earnings Per Share?

Answer 5

Earnings / No of Shares

Question 6

What is the earnings figure we use in EPS?

Answer 6

Profit after tax - NCI - preference dividends

Question 7

What is the no of shares figure used in EPS?

Answer 7

The weighted average number of shares in issue

Question 8

What are the three types of share issue that can impact basic EPS?

Answer 8

Full market price issue, bonus issue and rights issue

Question 9

How do we adjust the EPS weighted average shares figure for an issue of shares at full market price?

Answer 9

Time apportion the total number of shares in issue at each point in time

Question 10

How do we adjust the EPS weighted average shares figure for a bonus share issue?

Answer 10

Apply abonus fraction to all periods prior: new no. of shares / old no. of shares

Question 11

How do we adjust the EPS weighted average shares figure for a rights share issue?

Answer 11

Apply abonus fraction to all periods prior: old share price / theoretical share price after rights issue

Question 12

How do we restate prior periods EPS when there has been a bonus issue or rights issue?

Answer 12

Multiply by 1 / the bonus fraction (reciprocal of bonus fraction)

Question 13

What is diluted EPS?

Answer 13

EPS including potential ordinary shares which could be issued in the future - options, convertible loan stock or convertible preference shares

Question 14

How do you calculate diluted EPS in regards to convertible debt/preference shares?

Answer 14

For Earnings: Add back convertible bond element x interest rate x (1 - tax)
For no shares: Add on additional shares on conversion

Question 15

How do you calculate diluted EPS in regards to share options?

Answer 15

For Earnings: The SAME as basic EPS
For no shares: Add on shares that have been ‘given away’ (diff between shares issued and shares that would have been purchased for that cash)