Earnings Per Share Flashcards
NZ IAS 33 requires
disclosure of basic EPS and diluted EPS for entities whose ordinary shares are publicly traded, are in the process of issuing shares or potential ordinary shares in public markets, those who voluntarily disclose EPS
Earnings must be calculated after excluding
income tax and preference share dividends
Weighted average number of ordinary shares is calculated by
multiplying the number of shares outstanding by a time weighting factor
Events that affect number of shares (6)
*bonus shares/stock dividend
*share split
*new issue
*buy back
*rights issue
*actual conversion of potential ordinary shares
For what events do you need to restate EPS for last year?
Bonus shares, share split and rights issue
Previous year BEPS must be adjusted for the ____ of a rights issue
bonus element
POS are…
ordinary shares that may be issued in the future as a result of the conversion of bonds or pref shares, exercise of warrants and share options or fulfilment of a contractual condition
When POS are actually issued and become ordinary shares the effect on BEPS will be two fold, impacting… (2)
- number of shares on issue
- earnings maybe
A POS is dilutive if its…
conversion to ordinary shares would decrease EPS or increase loss per share
Convertible bonds adjustment
Numerator: add back interest saved
Denominator: increase shares outstanding by shares to be issued on conversion
Convertible preference shares adjustment
Numerator: add back dividend avoided as a result of conversion
Denominator: increase shares outstanding by shares to be issued on conversion
Options and Rights adjustments
Numerator: no effect
Denominator: MP - option price/ market price x number of options
Options and rights are dilutive if…
MP > exercise price
