Exam 19: Earnings Per Share

Earnings per share disclosed by reporting entities have limitations because of the: I - Different accounting methods that can be used in the determination of profit. II - Different amounts of profit depending on the size of the entity. III - Ability of an entity to change the number of shares used in the denominator. IV - Different numbers of shareholders depending on the size of the entity.

The profit or loss that is used in the calculation of basic earnings per share is calculated as:

The basic earnings per share and diluted earnings per share ratios must be presented in an entity's:

Earnings per share is calculated by comparing an entity's:

AASB 133 applies to the computation and presentation of earnings per share by:

Harry Ltd determined its profit attributable to ordinary shareholders for the reporting period ended 30 June 2014 as $960 000. The average market price of the entity's shares during the period is $4.00 per share. The weighted average number of ordinary shares on issue during the period is 1 000 000. The weighted average number of shares under share options arrangements during the year is 200 000 and the exercise price of shares under option is $3.50. The basic earnings per share at 30 June 2014 is:

If the entity has a discontinued operation, then it must also calculate and disclose the:

Paragraphs 70-73 of AASB 133 prescribe various disclosures relating to earnings per share. The disclosures include: I - The amounts used as the numerators (earnings) in the ratios. II - A reconciliation of the earnings amounts to the profit or loss attributable to the parent entity. for the period including the individual effect of each class of instruments that affects earnings per share. III - The number of ordinary shares outstanding at the end of the financial year. IV - The weighted average number of ordinary shares used as the denominator in the ratios.

Any errors or adjustments resulting from changes in accounting policies that are accounted for retrospectively requires:

A company issues bonus shares for no consideration on 1 August 2014. For the reporting period ended 30 June 2015, the calculation of:

Under paragraph 4, if an entity presents both consolidated and separate financial statements, the AASB 133 disclosures need only be determined on the basis of:

ABC Ltd has 21 000 ordinary shares on issue at 1 January 2015, which is the beginning of its reporting period. On 30 June 2015, it issued a further 2000 ordinary shares for cash. On 1 November 2015, ABC Ltd repurchased 600 shares at fair value in a market transaction. The weighted average number of shares for use in the earnings per share calculation is:

EPS refers to:

The number of shares used in the calculation of earnings per share is:

XYZ Ltd has 10 000 ordinary shares on issue at 1 July 2015, which is the beginning of its reporting period. On 1 May 2016, it issued a further 2000 ordinary shares for cash. The weighted average number of shares for use in the earnings per share calculation is:

Mary Ltd determined its profit attributable to ordinary shareholders for the reporting period ended 30 June 2014 as $720 000. The number of ordinary shares on issue up to 31 October 2013 was 50 000. Mary Ltd announced a two-for-one bonus issue of shares effective for each ordinary share outstanding at 31 October 2013. Basic earnings per share at 30 June 2014 is:

Earnings per share is calculated by:

For the purposes of calculating diluted earnings per share, an entity shall adjust the profit attributable to ordinary shareholders by the after-tax effect of the following item(s) related to dilutive potential ordinary shares:

If all of the dilutive securities were converted into ordinary shares, the diluted earnings per share ratio: