BV per Share and EPS Flashcards
Who are those required to show or present their earnings per share?
Publicly Traded Companies
(or in process for registration)
For those that are not publicly listed, where shall they present their Earnings Per Share?
Face of income statement or notes to financial statements
What are the two kinds of earnings per share?
- Basic EPS
- Diluted EPS
What are four potential ordinary shares that may be used in basic earnings per share?
- Convertible Preference Shares
- Convertible Bonds Payable
- Share Options/Warrants
What is the formula for Basic EPS?
Average Outstanding Shares
What are the two scenarios in calculating for number of shares that make it appear as if it was for the full year?
- Share Split
- Bonus Issue (Share Dividends)
Other types of shares given are computed based on their date.
How do you solve for the Adjustment Factor to be multiplied to the Average Outstanding Shares?
Adjustment Factor = MV of shares right on / MV of shares ex right
MV of shares ex right = MV of shares right on - 1 Right
1 Right = (MV of shares right on - Option Price) / # of Rights + 1
What are four types of Diluted Earnings per Share?
- Convertible Preference Shares
- Convertible Bonds Payable
- Options
- Contingent OS
What is the treatment of cumulative PS dividends in calculating for Basic EPS?
Current year’s dividends are deducted from net income.
WHETHER DECLARED OR NOT
What is the treatment of non-cumulative preference shares in calculating for Basic EPS?
Current year dividends only when declared.
In calculating for WANOS, how do you treat the:
1. Share/Stock Dividends
2. Share Splits
3. Rights Issue
WANOS = Weighted Average Number of Ordinary Shares
A change in the number of ordinary shares in the beginning of the earliest period executed/presented.
Changes can be increases or decreases.
What are the three cases that are treated retrospectively in finding the WANOS?
WANOS = Weighted Average Number of Ordinary Shares
- Share/Stock Dividends
- Share Splits
- Rights Issue
Retrospectively: As if happened in the beg. of earliest period presented
Share splits, share dividends, and rights issue affect all the events that happened during the period when it comes to finding WANOS.
(True or False)
False.
It only affects the events prior to the splits/divs/rights issues, retroacting to the date of outstanding shares.
Adj Factors only affect prior dates, never after exercise date!
This is computed when the entity’s capital structure includes potential ordinary shares?
Diluted Earnings per Share
What are the cases when there is:
1. Dilution
2. Anti-Dilution
- Dilution: Decrease in Basic EPS and Increase in Basic LPS
- Anti-Dilution: Increase in Basic EPS and Decrease in Basic LPS
If fully participative, how do you treat this?
Get a basic percentage for the ordinary.
Ratio the remaining dividends based on aggregate par value.
If partially participative, how do you treat this?
Divide remaining dividends to outstanding shares.
Compare partial % to the excess of basic %.
Use whatever is lower for the preference dividends and remaining goes to the ordinary dividends.
This is the approach that dilutive EPS uses in treating the potential ordinary shares.
“AS IF” Approach
As if the ordinary shares were already converted.
What are the adjustments to be made for DEPS in:
Convertible Preference Shares
Numerator: Add back the PS dividends
Denominator: Add the converted shares x months outstanding
(Remember treatment for cumulative and non-cumulative PS divs)
What are the adjustments to be made for potential OS in:
Convertible Bonds
Numerator: Add back the interest expense (net of tax)
Denominator: Add the converted shares x months outstanding
Multiply IE to TAX = 1 - TR
What method is used to find the increments of the denominator of the share options and share warrants in DEPS?
What is the formula?
Treasury Share Method:
Option Shares
Multiply: Exercise Price
Divide: Fair Value
———————
= Treasury Shares
Option Shares
- Treasury Shares
——————-
Increment of Shares
What is the ranking when there are 2 or more possible ordinary shares in calculating for DEPS?
- Warrants/Options
2/3. Preference Shares and Bonds Payable
In finding BV per share, what do you do if the cumulative preference shares have been paid?
No need to add it anymore to find the BV per share.
Note: can only be paid up to the extent of RE.
How do you treat liquidation premium?
Liquidation premium = Liquid value - par value
Add to the par value preference shares to be divided from the shareholders equity.
What is the treatment of subscriptions receivable in the calculation of SHE for the BVPS?
Excluded from SHE
What is the treatment of the preference share dividends when it is redeemable in finding the Basic Earnings Per Share?
Ignored.
It is treated as interest expense or finance cost.
How do you find the WANOS in a rights issue?
WANOS (before adj.) x adjustment factor x months prior to adj.
+
WANOS (after adj.) x months subsequent to adjustment
When it comes to finding the DEPS Share Options, what is the treatment when the exercise price is higher than the average market price?
Ignore. They are now considered antidilutive.
Topic: DEPS for Share Options
If there is a fair market value at year-end and an average market value, what do you use for computing the WANOS of the DEPS?
Average Market Value
Topic: DEPS for Share Options
If there is a fair market value at grant date and an average market value, what do you use for computing the WANOS of the DEPS?
Add the fair value at grant date to the option price before dividing it to the average market value.
How do you treat non convertible preference shares in DEPS?
- You can still deduct the dividends from the BEPS
- But you ignore it when it comes to looking for the DEPS.
