Exam 26: Earnings Per Share

Phlox Ltd has a profit after tax of $6 590 000 for the period ended 30 June 2015.Phlox Ltd also has $1 000 000 of 6% 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 3 000 000 fully paid ordinary shares issued.Phlox Ltd also has $1 500 000 in convertible debentures issued for the full year.It pays interest of 5% per annum and could be converted to 300 000 ordinary shares at the option of the debenture-holders.There are also 100 000 share options currently on issue with an exercise price of $1.30.The average market price for ordinary shares during the year was $2.70.The tax rate is 33%.What are the diluted earnings per share for Phlox Ltd in accordance with AASB 133?

Fitzroy Ltd has the following potential ordinary shares on issue as at 30 June 2009: Executive options issued 1 July 2006 Employees options issued 1 July 2007 Employees options issued 1 July 2008 No. of options 100000 200000 150000 Exercise price \ 2.80 \ 3.10 \ 3.30 Expiry date 30 June 2010 30 June 2012 30 June 2013 The closing price for Fitzroy Ltd shares on 30 June 2009 was $3.35 and the average share price for the period was $3.20. Which of following statements is correct with respect to the determination of a dilutive security that is in accordance with AASB 133 Earnings per Share?

Cavendish Ltd has 2 000 000 ordinary shares on issue at the beginning of the year,1 July 2014.These shares were issued at $2.00 each and at the end of the period have a current market value of $4.50.On 1 August 2014,Cavendish Ltd bought back 300 000 ordinary shares originally issued at $2.50 for $3.00 each.On 1 November 2014,800 000 shares were issued fully paid up at the current market value of these shares.On 1 March 2015,300 000 partly paid-up ordinary shares were issued at an issue price of $3.50.These shares were partly paid to $2.00.The partly paid shares are permitted proportionate rights to vote and receive dividends based on the relationship between the amount paid up and the issue price. For the year ended 30 June 2015,the net income after tax was $1 050 000. What are the basic earnings per share for Cavendish Ltd for the year ended 30 June 2015?

Craven Ltd has 10 000 000 ordinary shares on issue at the beginning of the year,1 July 2013.These shares were issued at $0.50 each and have a current market value of $3.00.On 1 November 2013,Craven Ltd bought back 1 000 000 ordinary shares originally issued at $0.50 for $1.90 each.On 1 February 2014,1 500 000 shares were issued fully paid up at the current market value of these shares.Also during the period,500 000 partly paid-up ordinary shares were issued.They were issued on 1 April 2014 at an issue price of $2.90.These shares were partly paid to $1.80.The partly paid shares are permitted proportionate rights to vote and receive dividends based on the relationship between the amount paid up and the issue price. Craven Ltd has 3 000 000,$1.00 preference shares that provide cumulative dividends at a rate of 8%. For the year ended 30 June 2014,the net income after tax was $20 000 000. What are the basic earnings per share for Craven Ltd for the year ended 30 June 2014?

In order to determine whether or not potential ordinary shares are dilutive,AASB 133 requires:

According to AASB 133 the two factors that must be considered when calculating the earnings per share include how earning are defined and:

According to AASB 133,the weighting applied to calculate the weighted-average number of shares is:

Why is the EPS number that important in financial reporting that there is one accounting standard devoted to this calculation process?

Flagstaff Ltd has the following potentially diluting securities outstanding for the year ended 30 June 2014: $200 000,6.5%,convertible note (10 000 ordinary shares) $200 000,6.5%,convertible preference shares (10 000 ordinary shares) 10 000 employee options convertible to one ordinary share (exercise price $2.50; average market price during the year was $2.70) 50 000 executive options convertible to one ordinary share (exercise price $4.50) Basic EPS for the year ended 30 June 2014 is calculated at $1.20 per share. Rank the above securities in the order of most dilutive to least dilutive potential ordinary shares that is in accordance with AASB 133

Gimlet Ltd has earnings after tax of $930 000 for the year ended 30 June 2015.At the beginning of the period Gimlet had 250 000 fully paid-up ordinary shares on issue.On 30 December 2014 the company made a one-for-six bonus issue.The last sale price of the shares immediately prior to the bonus issue was $1.35 each.What are the earnings per share taking into account the bonus issue?

BI Ltd has 7 000 000 ordinary shares on issue at the beginning of the year,1 July 2014.These shares were issued at $4.50 each and have a current market value of $8.00.On 1 September 2014,BI Ltd bought back 500 000 ordinary shares originally issued at $4.50 for $6.50 each.On 1 December 2014,1 000 000 shares were issued fully paid up at the current market value of these shares.Also during the period,800 000 partly paid-up ordinary shares were issued.They were issued on 1 February 2015 at an issue price of $7.20.These shares were partly paid to $4.50.The partly paid shares are permitted proportionate rights to vote and receive dividends based on the relationship between the amount paid up and the issue price. BI Ltd has 1 000 000,$1.00 preference shares that provide non-cumulative dividends at a rate of 10%.The dividends were not paid this period. For the year ended 30 June 2014,the net loss after tax was $1 000 000. What are the basic earnings per share for BI Ltd for the year ended 30 June 2015?

Sedona Ltd historically makes a profit and would like to reward its shareholders by declaring a bonus issue next year but is not sure what effects it may have on the company's basic and diluted EPS.As accountant to Sedona Ltd which advice do you think would best describe the effects of a bonus issue?

The conversion of potential ordinary shares has no flow-on effects.

To maximise dilution of basic EPS,dilutive potential ordinary shares with the highest 'earnings per incremental share' are included in the diluted earnings per share calculation before those with a lower 'earnings per incremental share'.

Beuno Ltd has 3 000 000 ordinary shares on issue at the beginning of the year,1 July 2014.These shares were issued at $2.00 each and at the end of the period have a current market value of $4.50.On 1 August 2014,Beuno Ltd bought back 600 000 ordinary shares originally issued at $2.50 for $3.00 each.On 1 November 2014,500 000 shares were issued fully paid up at the current market value of these shares.On 1 March 2015,200 000 partly paid-up ordinary shares were issued at an issue price of $3.50.These shares were partly paid to $2.00.The partly paid shares are permitted proportionate rights to vote and receive dividends based on the relationship between the amount paid up and the issue price.What is the weighted-average number of shares calculated in accordance with AASB 133?

AASB 133 Earnings per Share does not require entities to restate diluted earnings per share of any prior period presented for changes in the assumptions used in earnings per share calculations or for the conversion of potential ordinary shares into ordinary shares.

Benjy Ltd has 8 000 000 ordinary shares on issue at the beginning of the year,1 July 2015.These shares were issued at $1.00 each and have a current market value at the end of the period of $5.20.On 1 September 2015,Benjy Ltd bought back 1 000 000 ordinary shares originally issued at $1.50 for $4.00 each.On 1 February 2016,2 000 000 shares were issued at the current market value of these shares.On 1 March 2016,900 000 partly paid-up ordinary shares were issued at an issue price of $5.00.These shares were partly paid to $4.00.Shares are not granted proportionate rights to receive dividends.This right attaches only when the shares are fully paid.The shares,however,do provide a proportionate right to vote at annual general meetings.What is the weighted-average number of shares calculated in accordance with AASB 133?

Gaslight Ltd has earnings after tax of $1 260 000 for the year ended 30 June 2015.At the beginning of the period Gaslight had 570 000 fully paid-up ordinary shares on issue.On 30 December 2014 the company made a one-for-two bonus issue.The last sale price of the shares immediately prior to the bonus issue was $4.50 each.What are the earnings per share taking into account the bonus issue?

When the exercise price of a rights issue is lower than the market price of the shares,this is known as a:

Describe the AASB 133 EPS disclosure requirements.