Flashcards IFRS 33
IAS 33 : What is the scope ?
Applies to :
1-separate FS or conso FS
currently or in process of
trading in public market
actual or potential shares
2-voluntary EPS disclosures
3-no need for EPS on sep FS if presented in conso FS
4-EPS on sep FS should NOT be shown in conso FS
IAS 33 : Where are EPS shown
In the stmt of comprehensive income or stmt of P&L if shown separately
IAS 33 : Definition of ordinary shares
1 equity instrument that is 2 subordinate to all other classes of equity instruments 3 participate in profit for the period only after other types of shares such as preference shares have participated. 4 An entity may have more than one class of ordinary shares. 5 Ordinary shares of the same class have the same rights to receive dividends.
IAS 33 : How is the basic EPS calculated
1) Net result attributable to ordinary equity holders
total profit/loss
adjusted for AFTER TAX amounts of
preference shares :
A dividens,
B purch/sales transactions adj
C similar effects
DIVIDED BY
2) Weighted average of outstanding shares during period
IAS 33 : How to determine earnings for BASIC EPS calculation ?
Profit & Loss from continuing ops + in total adjusted for AFTER TAX amounts of
preference shares :
A) dividends cumulative or declared non-cumulative
B) purch/sales transactions :
issue/repurch above/below FV
B1- compensated
by higher/lower divids :
(i) amount=effective interest of premium or discount
(ii) dr/cr preference shares - dr/cr ret earn
(iii) profit adj = effective interest (imputed dividend)
B2- Non-comp :
(i) favorable diff => reduced profit (= imputed dividend to Pref SHldrs)
(ii) unfavor diff => no adj
C) similar effects from pref shs classified as equity
NCI :
Profit & loss attributable to NCI
IAS 33 : How to determine nbr of shares for BASIC EPS calculation ?
Include/Exclude :
1) incl mandatorily conv shares as of instrument issuance date
2) contingently issuable shares as of date when conditions are satisfied
3) excl/ignore recallable shares
4) changes w/o corresponding resources offered to all shareholders + to extent that they dont correspond
Timing :
1) issued for a busi comb : at acquisition date
2) changes w/o corresponding resources:
incl as of beginning of earliest period presented - eg. share split, bonus issue, etc
(reduction along w/special dividend =>NOT w/o ressources => incl as of spec div date)
IAS 33 : What is the objective of basic EPS
provide a measure of the interests of each ordinary share of a parent entity in the performance of the entity over the reporting period.
IAS 33 : what are the EPS types to be presented ?
For each class of ordinary shares with the same rights in profit for the period
1) Basic EPS for profit & loss
- in total
- for continuing ops - if presented in FS
- for discontinued ops
2) Diluted EPS
- in total
- for continuing ops - if presented in FS
- for discontinued ops
Presented in Comprehensive Income stmt or PL stmt if presented separately
IAS 33 : What is the objective of diluted EPS
to provide a measure of the interest of each ordinary share
in the performance of an entity-while giving effect to all dilutive potential
ordinary shares outstanding during the period.
IAS 33 : How is the diluted EPS calculated
1) Net result for BASIC EPS adj after tax effect
- div + int of pot dilutive shares during period
- hypoth inc/exp from conversion
* *DIVIDED BY**
2) Weigh avrge o/s shares BASIC EPS adjusted
- weigh avrg pot dilutive ord shares
IAS 33 : How to determine earnings for DILUTED EPS calculation ?
Earnings for BASIC EPS adj after tax effect :
Potential dilutive ord shs :
-div + int during period
-hyp other inc/exp from conversion
IAS 33 : How to determine nbr of shares for DILUTED EPS calculation ?
Weigh avrge o/s shares BASIC EPS adjusted
weighted avrg pot dilutive ord shares :
1-options/warrants
2-convertible pref shs/debt
3-conditionally issuable shs
4-cash/share settled contracts
5-partly paid shares
IAS 33 : definition of DILUTIVE
Decrease of EPS profit or Increase of EPS loss from continuing activities
IAS 33 : what is the basis and order when determening if DILUTIVE or not
Based on result
1- attributable to the parent company
2- of the ordinary shareholders (after divid of pref shareholders)
3- from continuing operations (i.e. excluding results from discontinuing ops)
Order
options/warrants first + then in order of most dilutive to least dilutive
IAS 33 : what has to be observed when determening wheather DILUTIVE or not, for OPTIONS/WARRANTS
Options/warrants :
1 - generally included first
2 - Use avrg share market price of period for calculation & dilutive effect
3 - No retroactive adj of prior year EPS for changes in market price
4 - Only nbr of pot dilutive shares
nbr of dilutive shares=
nbr opt shs x opt price
avrg market price
less nbr opt shs
5 - Unvested employee option exercise price is increased for not performed employee service, i.e. FV of outstanding empl service divided by nbr of related shares
6 - Pot receipt of excercise price -> if req’rd->assumed to redeemed debt at avrg price
7 - Purchased call/put option : NOT included->always antidilutive
8 - if out of money => ignore
IAS 33 : what has to be observed when determening if DILUTIVE or not, for Convertible instruments
Convertible instruments :
convertible pref shares dilutive when :
declared or cumulated dividend for period < baisc EPS
convertible debt instr dilutive when :
after tax interest per conv share < basic EPS
IAS 33 : what has to be observed when determening if DILUTIVE or not, for contingently issuable shares
Contingently issuable shares :
= ordinary shs (or options) issuable for little or no consideration upon satisfaction of conditions
passage of time is not considered as a condition as it is certain
Basic EPS :
include as of t_he date conditions are satisfied_
Diluted EPS:
Include from the beg of period or later agreement issue date
Conditions satisfied : include full number
Condistions not satisfied : include number applicable as if conditions valid at reporting date will remain to end of contingency period
IAS 33 : what has to be observed when determening if DILUTIVE or not, for contracts settled in shares or cash
Share/cash settled contracts :
For DILUTED EPS
At issuer option :
->assume settlement in shares
->adj earnings as if whole contract classified as equity
At holder option :
->assume most dilutive option
IAS 33 : when are EPS for prior periods adjusted ?
Retrospective adjustment
1) Modification of nbr of outstanding ordinary shares to all ordinary shareholders proportionally
Eg. : bonus issue, share split, reverse split
2) Errors
3) Changes in accounting policies
4) such changes are taken into account until approval of FS
No retrospective adj for change in estimates
IAS 33 : what are the disclosure requirements
1) reconciliation of earnings used for basic + diluted EPS to the P&L for the period showing the effect on each class of ordinary shares
2) recon of nbr of shares for basic to diluted nbr of shares by class
3) instrument that were antidilutive but could become dilutive in future
4) descr of
- ordinary or potential share trans
- after period end and
- not taken into account
- would have materially changed nbr if occured before period end
IAS 33 : what are the requirements for showing additional EPS for a component only
Optional : EPS for a reported component of comprehensive stmt (not required) :
- use weighted avrg nbr of shares per standard
- basis for determening numerator + denominator incl amts per share before + after tax
- reconciliation to a reported component if other amount is used
IAS 33 : rights issues below market price, how to calculate + take into account ?
1) IF rights issue offered to all existing shareholders :
2) bonus element (i.e. as exercise price is below market rate) has to adjust the number of shares of all shown periods prior to the exercise date in the EPS calculations.
3) multiplication factor calculation :
market price
at exercise date x nbr shares before exercise
+ nbr rights x exercise price
= Theoretical capitalisation value
divided by new nbr of shares
= diluted market price
market price at exerc date
diluted market price
==> multiplier for nbr of shares to all periods prior to exercise date
IAS 33 : How is the average market price of a share determined ?
1) monthly or weekly
2) closing rates or avrg of high/low
3) applied consistently
IAS 33 : How are instruments for potential shares of subsidiaries, associates or joint ventures dealt with ?
Affects the profit number only :
shift from profit attr to ord shareholders to NCI
as a result of changes in ownership + profit entitlement
IAS 33 : How are instruments issued by parent convertible to shares of a sub, assoc or JV taken into account ?
Affects the profit number only :
shift from profit attr to ord shareholders to NCI
as a result of changes in ownership + profit entitlement
IAS 33 : How are partly paid shares considered ?
For basic EPS : Taken into account in proportion to their entitlement to profit as compared to when they are fully paid. The number of shares is reduced accordingly.
For diluted EPS : unpaid portions that reduce entitlement to share in profit are treated as options/warrants
IAS 33 what are the 14 contractual situations to analyse
- *BASIC**
- *P**1-prefered shares dividend/interest
- *P**2-recalls/issues to all shhldrs above/below market price
- *P**3-purchase rights
- *P**4-NCI
- *S**5-mandatorily convertible shares
- *S**6-recallable shares
- *S**7-contingently issuable shares w/cond satisfied
- *S**8-Partly paid ord shares
- *DILUTED**
- *S**1-options/warrants
- *S**2-partly paid shares (treated as options)
- *S**3-conting issuable shares w/ + w/o cond satisfied
- *P**4-subs/associates/JV
- *PS**5-convertible bonds + pref shs
- *PS**6-issued fin contracts share or cash settled
