Exam 26: Earnings Per Share

ABC Ltd's basic earnings per share is $1.25 for the year ended 2012.The company has the following outstanding potential ordinary shares at the start of the year with the following information: Potential ordinary shares (POS) Number of POS Incremental EPS Preference shares 50000 \ 0.17 Convertible notes 50000 \ 0.20 Executive options(exercise price -\ 2.20 ; expiry date 30/06/16) 100000 NA Employee options (exercise price -\ 1.70 ; expiry date 30/06/14) 100000 NA Average share price for ABC Ltd during the year is $1.80. Which of the above potential ordinary shares is the most dilutive and least dilutive POS in accordance with AASB 133 Earnings per Share,respectively?

Rose Ltd has a net income after tax of $3 400 000 for the year ended 30 June 2015.At the beginning of the period Rose Ltd has 1 800 000 fully paid-up ordinary shares on issue.On 1 October 2014 Rose had issued a further 200 000 fully paid-up ordinary shares at an issue price of $5.00.On 1 May 2015 Rose Ltd made a one-for-four bonus issue of ordinary shares out of retained earnings.The last sale price of an ordinary share before the bonus issue was $5.50.The basic earnings per share for the period ended 30 June 2014 was $2.00 per share.What is the earnings per share figure for the period ended 30 June 2015 and the comparative earnings per share for the previous year to be reported in the 2015 financial reports according to AASB 133?

If a bonus or rights issue is made at the prevailing market price of the shares then there is no bonus element in the issue.

AASB 133 requires disclosure of diluted EPS even when these numbers are equal.

Under AASB 133 an entity is not required to disclose earnings per share where a loss has been made for the period.

Pilbarra Ltd has a profit after tax of $20 220 000 for the period ended 30 June 2015.Pilbarra Ltd also has $15 000 000 of 5% cumulative preference shares.The dividends on the preference shares are not treated as expenses in the statement of comprehensive income. As at 1 July 2014 there were 12 000 000 fully paid ordinary shares issued.Pilbarra Ltd also has $6 000 000 in convertible debentures issued for the full year.It pays interest of 4.5% per annum and could be converted to 3 000 000 ordinary shares at the option of the debenture-holders.There are also 900 000 share options currently on issue with an exercise price of $4.50.The average market price for ordinary shares during the year was $6.90.In addition to the preference shares mentioned above,Pilbarra Ltd also has 1 000 000,$1.00,4% cumulative convertible preference shares that are convertible at the option of the entity.It is probable that these preference shares will be converted some time in the next period.The tax rate is 33%.What are the diluted earnings per share for Pilbarra Ltd in accordance with AASB 133?

The definition of earnings contained in AASB 133:

AASB 133 requires an entity to disclose basic earnings per share for discontinued operations on the face of the statement of comprehensive income.

If an entity has both convertible preference shares and convertible notes outstanding at year-end paying the same amount of cash payment and convertible to equal numbers of ordinary shares,which security will cause the greater reduction in diluted EPS when converted and why?

AASB 133 Earnings per Share requires entities to reflect in the diluted earnings per share all outstanding convertible instruments.

Cooren Ltd has 1 520 000 ordinary shares on issue at the beginning of the year,1 July 2014.These shares were issued at $2.00 each and have a current market value of $3.50.On 1 October 2014,400 000 ordinary fully paid shares were issued for at the current market value of these shares.On 1 March 2015 Cooren Ltd bought back 100 000 shares originally issued at $2.50 for $3.25 each.What is the weighted-average number of shares calculated in accordance with AASB 133?

Under which of the following situations would the potential ordinary shares be included in the calculation of diluted earnings per share?

Navajo Ltd have the following options on issue as at 30 June 2009: I: Option issued 1 July 2006 II: Option issued 1 July 2007 III: Option issued 1 July 2008 Number of options 100000 200000 300000 Exercise price \ 2.60 \ 3.30 \ 4.50 Expiry date 30 June 2010 30 June 2012 30 June 2013 The close price for Navajo Ltd shares was $3.35 and the average market price for the period was $3.20. In accordance with AASB 113,which of the options in the table is/are potentially diluting for Navajo Ltd for the year ended 30 June 2009?

In calculating the weighted-average number of ordinary shares for use in earnings per share,it is necessary to adjust the number of shares for the ordinary share equivalents represented by the partly paid ordinary shares' rights to participate in voting at the annual general meeting.

If the conversion of potential ordinary shares to ordinary shares is mandatory they must be included in diluted earnings per share even if their inclusion does not dilute earnings per share.

In accordance with AASB 133,which of the following is required to be presented on the face of the statement of comprehensive income? I: basic and diluted EPS from continuing operations attributable to ordinary shareholders of the parent entity II: basic and diluted EPS for discontinued operations III: basic and diluted loss per share

Which of the following equity instruments would be considered to be ordinary shares for the purposes of AASB 133?

AASB 133 adopts a substance over form test in relation to the definition of earnings.

For the purpose of calculating earnings per share,the denominator is:

AASB 133 requires entities to disclose earnings per share and diluted earnings per share in the notes to the accounts.