Chapter 10 - Earnings Per Share Flashcards
(17 cards)
What standard covers Earnings Per Share ?
IAS 33
Who does IAS 33 apply to?
Entities whose ordinary shares are publicly traded or are in the process of being issued in public markets
Under IAS 33, how does an entity present EPS if an entity presents both group and individual entity financial statements?
EPS disclosures are only required in the entity’s individual financial statements
If an entity has both continuing and discontinued operations, how does an entity report EPS?
Both total and continuing operations separately under IAS 32.
What is the formula for earnings per share?
Net profit or (loss) for the period attributable to ordinary shareholders
divided by
Weighted average number of ordinary shares outstanding for the period
What is the first step in calculating EPS ?
First calculate the appropriate earnings figure
Then, the appropriate weighted average number of ordinary shares outstanding during the period.
When looking at earnings under IAS 32, what adjustment is necessary for EPS calculations?
In looking at profit / loss attributable to ordinary shareholders, it is necessary to deduct any dividends or other financing costs for preference shares (including financing costs / premium).
True or false:
When calculating earnings per share, the total shares at the reporting date should be used.
False.
EPS is based on the weighted average of shares on issue.
How are weighted average shares calculated under IAS 32?
Number of shares outstanding at the beginning of period
Adjust for shares issued or cancelled during the period
Where the shares have changed, use a weighting factor - the number of days shares outstanding, as a proportion of the total number of days in the period.
In calculating EPS, when new shares are issued, what date is used for the days outstanding?
Counted from the date the consideration for their issue is receivable
What standard covers diluted earnings per share?
IAS 33
How does diluted earnings per share differ from ordinary earnings per share?
Diluted = takes into account any convertible instrument (e.g. convertible preference shares).
What steps are involved in calculating diluted EPS?
Addback convertible instrument financing costs to earnings (as entity will no longer have to pay if redeemed)
Then, calculate the weighted average shares assuming the convertible instruments are converted.
The date of conversion is the beginning of the earliest period reported, i.e. had always been in existence.
Under IAS 33 for diluted shares, what should be used to calculate weighted average shares?
Date shares available is the earliest period available, as if they have always been in existence.
Assume that options (having the potential to be ordinary shares) are included.
Proceeds of options are presumed to be have been from the issue of shares at the average market price.
True or false:
Under IAS 33, options that can be converted to ordinary shares are included in the diluted EPS calc.
True
Under IAS 32 and IAS 33, what disclosures are required for EPS?
- Present the EPS from continuing operations in the P&L / SOCI
- Present the EPS on discontinuing operations (if applicable), either on P&L / SOCI or the notes
- Reconciliation of the weighted average shares calculation
If an entity makes a loss for the period, are they still required to report EPS and diluted EPS?
Yes
