IAS33 每股收益

IAS33 每股收益 IAS 33 International Accounting Standard 33 Earnings per Share This version includes amendments resulting from IFRSs issued up to 31 December 2008. IAS 33 Earnings Per Share was issued by the International Accounting Standards Committee in February 1997. The Standing Interpretations Committee developed SIC-24 Earnings Per Share—Financial Instruments and Other Contracts that May Be Settled in Shares (issued November 2000). In April 2001 the International Accounting Standards Board (IASB) resolved that all Standards and Interpretations issued under previous Constitutions continued to be applicable unless and until they were amended or withdrawn. In December 2003 the IASB issued a revised IAS 33 with a modified title—Earnings per Share. The revised standard also replaced SIC-24. Since then, IAS 33 and its accompanying documents have been amended by the following IFRSs: • IFRS 2 Share-based Payment (issued February 2004) • IFRS 3 Business Combinations (issued March 2004) • IFRS 7 Financial Instruments: Disclosures (issued August 2005) • IFRS 8 Operating Segments (issued November 2006)1 2• IAS 1 Presentation of Financial Statements (as revised in September 2007) 3• IFRS 3 Business Combinations (as revised in January 2008) 4• IAS 27 Consolidated and Separate Financial Statements (as amended in January 2008). 1 effective date 1 January 2009 2 effective date 1 January 2009 3 effective date 1 July 2009 4 effective date 1 July 2009 ? IASCF 1 IAS 33 CONTENTS paragraphs INTRODUCTION IN1–IN3 INTERNATIONAL ACCOUNTING STANDARD 33 EARNINGS PER SHARE OBJECTIVE 1 SCOPE 2–4A DEFINITIONS 5–8 MEASUREMENT 9–63 Basic earnings per share 9–29 Earnings 12–18 Shares 19–29 Diluted earnings per share 30–63 Earnings 33–35 Shares 36–40 Dilutive potential ordinary shares 41–63 Options, warrants and their equivalents 45–48 Convertible instruments 49–51 Contingently issuable shares 52–57 Contracts that may be settled in ordinary shares or cash 58–61 Purchased options 62 Written put options 63 RETROSPECTIVE ADJUSTMENTS 64–65 PRESENTATION 66–69 DISCLOSURE 70–73A EFFECTIVE DATE 74–74A WITHDRAWAL OF OTHER PRONOUNCEMENTS 75–76 APPENDICES A Application guidance B Amendments to other pronouncements APPROVAL BY THE BOARD OF IAS 33 ISSUED IN DECEMBER 2003 BASIS FOR CONCLUSIONS ILLUSTRATIVE EXAMPLES 2 ? IASCF IAS 33 International Accounting Standard 33 Earnings per Share (IAS 33) is set out in paragraphs 1–76 and Appendices A and B. All the paragraphs have equal authority but retain the IASC format of the Standard when it was adopted by the IASB. IAS 33 should be read in the context of its objective and the Basis for Conclusions, the Preface to International Financial Reporting Standards and the Framework for the Preparation and Presentation of Financial Statements. IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors provides a basis for selecting and applying accounting policies in the absence of explicit guidance. ? IASCF 3 IAS 33 Introduction IN1 International Accounting Standard 33 Earnings per Share (IAS 33) replaces IAS 33 Earnings Per Share (issued in 1997), and should be applied for annual periods beginning on or after 1 January 2005. Earlier application is encouraged. The Standard also replaces SIC-24 Earnings Per Share—Financial Instruments and Other Contracts that May Be Settled in Shares. Reasons for revising IAS 33 IN2 The International Accounting Standards Board has developed this revised IAS 33 as part of its project on Improvements to International Accounting Standards. The project was undertaken in the light of queries and criticisms raised in relation to the Standards by securities regulators, professional accountants and other interested parties. The objectives of the project were to reduce or eliminate alternatives, redundancies and conflicts within the Standards, to deal with some convergence issues and to make other improvements. IN3 For IAS 33 the Board’s main objective was a limited revision to provide additional guidance and illustrative examples on selected complex matters, such as the effects of contingently issuable shares; potential ordinary shares of subsidiaries, joint ventures or associates; participating equity instruments; written put options; purchased put and call options; and mandatorily convertible instruments. The Board did not reconsider the fundamental approach to the determination and presentation of earnings per share contained in IAS 33. 4 ? IASCF IAS 33 International Accounting Standard 33 Earnings per Share Objective 1 The objective of this Standard is to prescribe principles for the determination and presentation of earnings per share, so as to improve performance comparisons between different entities in the same reporting period and between different reporting periods for the same entity. Even though earnings per share data have limitations because of the different accounting policies that may be used for determining ‘earnings’, a consistently determined denominator enhances financial reporting. The focus of this Standard is on the denominator of the earnings per share calculation. Scope 2 This Standard shall apply to (a) the separate or individual financial statements of an entity: (i) whose ordinary shares or potential ordinary shares are traded in a public market (a domestic or foreign stock exchange or an over-the-counter market, including local and regional markets) or (ii) that files, or is in the process of filing, its financial statements with a securities commission or other regulatory organisation for the purpose of issuing ordinary shares in a public market; and (b) the consolidated financial statements of a group with a parent: (i) whose ordinary shares or potential ordinary shares are traded in a public market (a domestic or foreign stock exchange or an over-the-counter market, including local and regional markets) or (ii) that files, or is in the process of filing, its financial statements with a securities commission or other regulatory organisation for the purpose of issuing ordinary shares in a public market. 3 An entity that discloses earnings per share shall calculate and disclose earnings per share in accordance with this Standard. 4 When an entity presents both consolidated financial statements and separate financial statements prepared in accordance with IAS 27 Consolidated and Separate Financial Statements, the disclosures required by this Standard need be presented only on the basis of the consolidated information. An entity that chooses to disclose earnings per share based on its separate financial statements shall present such earnings per share information only in its statement of comprehensive income. An entity shall not present such earnings per share information in the consolidated financial statements. 4A If an entity presents the components of profit or loss in a separate income statement as described in paragraph 81 of IAS 1 Presentation of Financial Statements (as revised in 2007), it presents earnings per share only in that separate statement. Definitions 5 The following terms are used in this Standard with the meanings specified: Antidilution is an increase in earnings per share or a reduction in loss per share resulting from the assumption that convertible instruments are converted, that options or warrants are exercised, or that ordinary shares are issued upon the satisfaction of specified conditions. A contingent share agreement is an agreement to issue shares that is dependent on the satisfaction of specified conditions. Contingently issuable ordinary shares are ordinary shares issuable for little or no cash or other consideration upon the satisfaction of specified conditions in a contingent share agreement. ? IASCF 5 IAS 33 Dilution is a reduction in earnings per share or an increase in loss per share resulting from the assumption that convertible instruments are converted, that options or warrants are exercised, or that ordinary shares are issued upon the satisfaction of specified conditions. Options, warrants and their equivalents are financial instruments that give the holder the right to purchase ordinary shares. An ordinary share is an equity instrument that is subordinate to all other classes of equity instruments. A potential ordinary share is a financial instrument or other contract that may entitle its holder to ordinary shares. Put options on ordinary shares are contracts that give the holder the right to sell ordinary shares at a specified price for a given period. 6 Ordinary shares participate in profit for the period only after other types of shares such as preference shares have participated. An entity may have more than one class of ordinary shares. Ordinary shares of the same class have the same rights to receive dividends. 7 Examples of potential ordinary shares are: (a) financial liabilities or equity instruments, including preference shares, that are convertible into ordinary shares; (b) options and warrants; (c) shares that would be issued upon the satisfaction of conditions resulting from contractual arrangements, such as the purchase of a business or other assets. 8 Terms defined in IAS 32 Financial Instruments: Presentation are used in this Standard with the meanings specified in paragraph 11 of IAS 32, unless otherwise noted. IAS 32 defines financial instrument, financial asset, financial liability, equity instrument and fair value, and provides guidance on applying those definitions. Measurement Basic earnings per share 9 An entity shall calculate basic earnings per share amounts for profit or loss attributable to ordinary equity holders of the parent entity and, if presented, profit or loss from continuing operations attributable to those equity holders. 10 Basic earnings per share shall be calculated by dividing profit or loss attributable to ordinary equity holders of the parent entity (the numerator) by the weighted average number of ordinary shares outstanding (the denominator) during the period. 11 The objective of basic earnings per share information is to provide a measure of the interests of each ordinary share of a parent entity in the performance of the entity over the reporting period. Earnings 12 For the purpose of calculating basic earnings per share, the amounts attributable to ordinary equity holders of the parent entity in respect of: (a) profit or loss from continuing operations attributable to the parent entity; and (b) profit or loss attributable to the parent entity shall be the amounts in (a) and (b) adjusted for the after-tax amounts of preference dividends, differences arising on the settlement of preference shares, and other similar effects of preference shares classified as equity. 13 All items of income and expense attributable to ordinary equity holders of the parent entity that are recognised in a period, including tax expense and dividends on preference shares classified as liabilities are included in the determination of profit or loss for the period attributable to ordinary equity holders of the parent entity (see IAS 1). 14 The after-tax amount of preference dividends that is deducted from profit or loss is: (a) the after-tax amount of any preference dividends on non-cumulative preference shares declared in respect of the period; and 6 ? IASCF IAS 33 (b) the after-tax amount of the preference dividends for cumulative preference shares required for the period, whether or not the dividends have been declared. The amount of preference dividends for the period does not include the amount of any preference dividends for cumulative preference shares paid or declared during the current period in respect of previous periods. 15 Preference shares that provide for a low initial dividend to compensate an entity for selling the preference shares at a discount, or an above-market dividend in later periods to compensate investors for purchasing preference shares at a premium, are sometimes referred to as increasing rate preference shares. Any original issue discount or premium on increasing rate preference shares is amortised to retained earnings using the effective interest method and treated as a preference dividend for the purposes of calculating earnings per share. 16 Preference shares may be repurchased under an entity’s tender offer to the holders. The excess of the fair value of the consideration paid to the preference shareholders over the carrying amount of the preference shares represents a return to the holders of the preference shares and a charge to retained earnings for the entity. This amount is deducted in calculating profit or loss attributable to ordinary equity holders of the parent entity. 17 Early conversion of convertible preference shares may be induced by an entity through favourable changes to the original conversion terms or the payment of additional consideration. The excess of the fair value of the ordinary shares or other consideration paid over the fair value of the ordinary shares issuable under the original conversion terms is a return to the preference shareholders, and is deducted in calculating profit or loss attributable to ordinary equity holders of the parent entity. 18 Any excess of the carrying amount of preference shares over the fair value of the consideration paid to settle them is added in calculating profit or loss attributable to ordinary equity holders of the parent entity. Shares 19 For the purpose of calculating basic earnings per share, the number of ordinary shares shall be the weighted average number of ordinary shares outstanding during the period. 20 Using the weighted average number of ordinary shares outstanding during the period reflects the possibility that the amount of shareholders’ capital varied during the period as a result of a larger or smaller number of shares being outstanding at any time. The weighted average number of ordinary shares outstanding during the period is the number of ordinary shares outstanding at the beginning of the period, adjusted by the number of ordinary shares bought back or issued during the period multiplied by a time-weighting factor. The time-weighting factor is the number of days that the shares are outstanding as a proportion of the total number of days in the period; a reasonable approximation of the weighted average is adequate in many circumstances. 21 Shares are usually included in the weighted average number of shares from the date consideration is receivable (which is generally the date of their issue), for example: (a) ordinary shares issued in exchange for cash are included when cash is receivable; (b) ordinary shares issued on the voluntary reinvestment of dividends on ordinary or preference shares are included when dividends are reinvested; (c) ordinary shares issued as a result of the conversion of a debt instrument to ordinary shares are included from the date that interest ceases to accrue; (d) ordinary shares issued in place of interest or principal on other financial instruments are included from the date that interest ceases to accrue; (e) ordinary shares issued in exchange for the settlement of a liability of the entity are included from the settlement date; (f) ordinary shares issued as consideration for the acquisition of an asset other than cash are included as of the date on which the acquisition is recognised; and (g) ordinary shares issued for the rendering of services to the entity are included as the services are rendered. The timing of the inclusion of ordinary shares is determined by the terms and conditions attaching to their issue. Due consideration is given to the substance of any contract associated with the issue. 22 Ordinary shares issued as part of the consideration transferred in a business combination are included in the weighted average number of shares from the acquisition date. This is because the acquirer incorporates into its statement of comprehensive income the acquiree’s profits and losses from that date. 23 Ordinary shares that will be issued upon the conversion of a mandatorily convertible instrument are included in the calculation of basic earnings per share from the date the contract is entered into. ? IASCF 7 IAS 33 24 Contingently issuable shares are treated as outstanding and are included in the calculation of basic earnings per share only from the date when all necessary conditions are satisfied (ie the events have occurred). Shares that are issuable solely after the passage of time are not contingently issuable shares, because the passage of time is a certainty. Outstanding ordinary shares that are contingently returnable (ie subject to recall) are not treated as outstanding and are excluded from the calculation of basic earnings per share until the date the shares are no longer subject to recall. 25 [Deleted] 26 The weighted average number of ordinary shares outstanding during the period and for all periods presented shall be adjusted for events, other than the conversion of potential ordinary shares, that have changed the number of ordinary shares outstanding without a corresponding change in resources. 27 Ordinary shares may be issued, or the number of ordinary shares outstanding may be reduced, without a corresponding change in resources. Examples include: (a) a capitalisation or bonus issue (sometimes referred to as a stock dividend); (b) a bonus element in any other issue, for example a bonus element in a rights issue to existing shareholders; (c) a share split; and (d) a reverse share split (consolidation of shares). 28 In a capitalisation or bonus issue or a share split, ordinary shares are issued to existing shareholders for no additional consideration. Therefore, the number of ordinary shares outstanding is increased without an increase in resources. The number of ordinary shares outstanding before the event is adjusted for the proportionate change in the number of ordinary shares outstanding as if the event had occurred at the beginning of the earliest period presented. For example, on a two-for-one bonus issue, the number of ordinary shares outstanding before the issue is multiplied by three to obtain the new total number of ordinary shares, or by two to obtain the number of additional ordinary shares. 29 A consolidation of ordinary shares generally reduces the number of ordinary shares outstanding without a corresponding reduction in resources. However, when the overall effect is a share repurchase at fair value, the reduction in the number of ordinary shares outstanding is the result of a corresponding reduction in resources. An example is a share consolidation combined with a special dividend. The weighted average number of ordinary shares outstanding for the period in which the combined transaction takes place is adjusted for the reduction in the number of ordinary shares from the date the special dividend is recognised. Diluted earnings per share 30 An entity shall calculate diluted earnings per share amounts for profit or loss attributable to ordinary equity holders of the parent entity and, if presented, profit or loss from continuing operations attributable to those equity holders. 31 For the purpose of calculating diluted earnings per share, an entity shall adjust profit or loss attributable to ordinary equity holders of the parent entity, and the weighted average number of shares outstanding, for the effects of all dilutive potential ordinary shares. 32 The objective of diluted earnings per share is consistent with that of basic earnings per share—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. As a result: (a) profit or loss attributable to ordinary equity holders of the parent entity is increased by the after-tax amount of dividends and interest recognised in the period in respect of the dilutive potential ordinary shares and is adjusted for any other changes in income or expense that would result from the conversion of the dilutive potential ordinary shares; and (b) the weighted average number of ordinary shares outstanding is increased by the weighted average number of additional ordinary shares that would have been outstanding assuming the conversion of all dilutive potential ordinary shares. Earnings 33 For the purpose of calculating diluted earnings per share, an entity shall adjust profit or loss attributable to ordinary equity holders of the parent entity, as calculated in accordance with paragraph 12, by the after-tax effect of: 8 ? IASCF IAS 33 (a) any dividends or other items related to dilutive potential ordinary shares deducted in arriving at profit or loss attributable to ordinary equity holders of the parent entity as calculated in accordance with paragraph 12; (b) any interest recognised in the period related to dilutive potential ordinary shares; and (c) any other changes in income or expense that would result from the conversion of the dilutive potential ordinary shares. 34 After the potential ordinary shares are converted into ordinary shares, the items identified in paragraph 33(a)–(c) no longer arise. Instead, the new ordinary shares are entitled to participate in profit or loss attributable to ordinary equity holders of the parent entity. Therefore, profit or loss attributable to ordinary equity holders of the parent entity calculated in accordance with paragraph 12 is adjusted for the items identified in paragraph 33(a)–(c) and any related taxes. The expenses associated with potential ordinary shares include transaction costs and discounts accounted for in accordance with the effective interest method (see paragraph 9 of IAS 39 Financial Instruments: Recognition and Measurement, as revised in 2003). 35 The conversion of potential ordinary shares may lead to consequential changes in income or expenses. For example, the reduction of interest expense related to potential ordinary shares and the resulting increase in profit or reduction in loss may lead to an increase in the expense related to a non-discretionary employee profit-sharing plan. For the purpose of calculating diluted earnings per share, profit or loss attributable to ordinary equity holders of the parent entity is adjusted for any such consequential changes in income or expense. Shares 36 For the purpose of calculating diluted earnings per share, the number of ordinary shares shall be the weighted average number of ordinary shares calculated in accordance with paragraphs 19 and 26, plus the weighted average number of ordinary shares that would be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares. Dilutive potential ordinary shares shall be deemed to have been converted into ordinary shares at the beginning of the period or, if later, the date of the issue of the potential ordinary shares. 37 Dilutive potential ordinary shares shall be determined independently for each period presented. The number of dilutive potential ordinary shares included in the year-to-date period is not a weighted average of the dilutive potential ordinary shares included in each interim computation. 38 Potential ordinary shares are weighted for the period they are outstanding. Potential ordinary shares that are cancelled or allowed to lapse during the period are included in the calculation of diluted earnings per share only for the portion of the period during which they are outstanding. Potential ordinary shares that are converted into ordinary shares during the period are included in the calculation of diluted earnings per share from the beginning of the period to the date of conversion; from the date of conversion, the resulting ordinary shares are included in both basic and diluted earnings per share. 39 The number of ordinary shares that would be issued on conversion of dilutive potential ordinary shares is determined from the terms of the potential ordinary shares. When more than one basis of conversion exists, the calculation assumes the most advantageous conversion rate or exercise price from the standpoint of the holder of the potential ordinary shares. 40 A subsidiary, joint venture or associate may issue to parties other than the parent, venturer or investor potential ordinary shares that are convertible into either ordinary shares of the subsidiary, joint venture or associate, or ordinary shares of the parent, venturer or investor (the reporting entity). If these potential ordinary shares of the subsidiary, joint venture or associate have a dilutive effect on the basic earnings per share of the reporting entity, they are included in the calculation of diluted earnings per share. Dilutive potential ordinary shares 41 Potential ordinary shares shall be treated as dilutive when, and only when, their conversion to ordinary shares would decrease earnings per share or increase loss per share from continuing operations. 42 An entity uses profit or loss from continuing operations attributable to the parent entity as the control number to establish whether potential ordinary shares are dilutive or antidilutive. Profit or loss from continuing operations attributable to the parent entity is adjusted in accordance with paragraph 12 and excludes items relating to discontinued operations. 43 Potential ordinary shares are antidilutive when their conversion to ordinary shares would increase earnings per share or decrease loss per share from continuing operations. The calculation of diluted earnings per share does not assume conversion, exercise, or other issue of potential ordinary shares that would have an antidilutive effect on earnings per share. ? IASCF 9 IAS 33 44 In determining whether potential ordinary shares are dilutive or antidilutive, each issue or series of potential ordinary shares is considered separately rather than in aggregate. The sequence in which potential ordinary shares are considered may affect whether they are dilutive. Therefore, to maximise the dilution of basic earnings per share, each issue or series of potential ordinary shares is considered in sequence from the most dilutive to the least dilutive, ie dilutive potential ordinary shares with the lowest ‘earnings per incremental share’ are included in the diluted earnings per share calculation before those with a higher earnings per incremental share. Options and warrants are generally included first because they do not affect the numerator of the calculation. Options, warrants and their equivalents 45 For the purpose of calculating diluted earnings per share, an entity shall assume the exercise of dilutive options and warrants of the entity. The assumed proceeds from these instruments shall be regarded as having been received from the issue of ordinary shares at the average market price of ordinary shares during the period. The difference between the number of ordinary shares issued and the number of ordinary shares that would have been issued at the average market price of ordinary shares during the period shall be treated as an issue of ordinary shares for no consideration. 46 Options and warrants are dilutive when they would result in the issue of ordinary shares for less than the average market price of ordinary shares during the period. The amount of the dilution is the average market price of ordinary shares during the period minus the issue price. Therefore, to calculate diluted earnings per share, potential ordinary shares are treated as consisting of both the following: (a) a contract to issue a certain number of the ordinary shares at their average market price during the period. Such ordinary shares are assumed to be fairly priced and to be neither dilutive nor antidilutive. They are ignored in the calculation of diluted earnings per share. (b) a contract to issue the remaining ordinary shares for no consideration. Such ordinary shares generate no proceeds and have no effect on profit or loss attributable to ordinary shares outstanding. Therefore, such shares are dilutive and are added to the number of ordinary shares outstanding in the calculation of diluted earnings per share. 47 Options and warrants have a dilutive effect only when the average market price of ordinary shares during the period exceeds the exercise price of the options or warrants (ie they are ‘in the money’). Previously reported earnings per share are not retroactively adjusted to reflect changes in prices of ordinary shares. 47A For share options and other share-based payment arrangements to which IFRS 2 Share-based Payment applies, the issue price referred to in paragraph 46 and the exercise price referred to in paragraph 47 shall include the fair value of any goods or services to be supplied to the entity in the future under the share option or other share-based payment arrangement. 48 Employee share options with fixed or determinable terms and non-vested ordinary shares are treated as options in the calculation of diluted earnings per share, even though they may be contingent on vesting. They are treated as outstanding on the grant date. Performance-based employee share options are treated as contingently issuable shares because their issue is contingent upon satisfying specified conditions in addition to the passage of time. Convertible instruments 49 The dilutive effect of convertible instruments shall be reflected in diluted earnings per share in accordance with paragraphs 33 and 36. 50 Convertible preference shares are antidilutive whenever the amount of the dividend on such shares declared in or accumulated for the current period per ordinary share obtainable on conversion exceeds basic earnings per share. Similarly, convertible debt is antidilutive whenever its interest (net of tax and other changes in income or expense) per ordinary share obtainable on conversion exceeds basic earnings per share. 51 The redemption or induced conversion of convertible preference shares may affect only a portion of the previously outstanding convertible preference shares. In such cases, any excess consideration referred to in paragraph 17 is attributed to those shares that are redeemed or converted for the purpose of determining whether the remaining outstanding preference shares are dilutive. The shares redeemed or converted are considered separately from those shares that are not redeemed or converted. Contingently issuable shares 52 As in the calculation of basic earnings per share, contingently issuable ordinary shares are treated as outstanding and included in the calculation of diluted earnings per share if the conditions are satisfied (ie the events have occurred). Contingently issuable shares are included from the beginning of the period (or from the date of the contingent share agreement, if later). If the conditions are not satisfied, the number of contingently issuable 10 ? IASCF IAS 33 shares included in the diluted earnings per share calculation is based on the number of shares that would be issuable if the end of the period were the end of the contingency period. Restatement is not permitted if the conditions are not met when the contingency period expires. 53 If attainment or maintenance of a specified amount of earnings for a period is the condition for contingent issue and if that amount has been attained at the end of the reporting period but must be maintained beyond the end of the reporting period for an additional period, then the additional ordinary shares are treated as outstanding, if the effect is dilutive, when calculating diluted earnings per share. In that case, the calculation of diluted earnings per share is based on the number of ordinary shares that would be issued if the amount of earnings at the end of the reporting period were the amount of earnings at the end of the contingency period. Because earnings may change in a future period, the calculation of basic earnings per share does not include such contingently issuable ordinary shares until the end of the contingency period because not all necessary conditions have been satisfied. 54 The number of ordinary shares contingently issuable may depend on the future market price of the ordinary shares. In that case, if the effect is dilutive, the calculation of diluted earnings per share is based on the number of ordinary shares that would be issued if the market price at the end of the reporting period were the market price at the end of the contingency period. If the condition is based on an average of market prices over a period of time that extends beyond the end of the reporting period, the average for the period of time that has lapsed is used. Because the market price may change in a future period, the calculation of basic earnings per share does not include such contingently issuable ordinary shares until the end of the contingency period because not all necessary conditions have been satisfied. 55 The number of ordinary shares contingently issuable may depend on future earnings and future prices of the ordinary shares. In such cases, the number of ordinary shares included in the diluted earnings per share calculation is based on both conditions (ie earnings to date and the current market price at the end of the reporting period). Contingently issuable ordinary shares are not included in the diluted earnings per share calculation unless both conditions are met. 56 In other cases, the number of ordinary shares contingently issuable depends on a condition other than earnings or market price (for example, the opening of a specific number of retail stores). In such cases, assuming that the present status of the condition remains unchanged until the end of the contingency period, the contingently issuable ordinary shares are included in the calculation of diluted earnings per share according to the status at the end of the reporting period. 57 Contingently issuable potential ordinary shares (other than those covered by a contingent share agreement, such as contingently issuable convertible instruments) are included in the diluted earnings per share calculation as follows: (a) an entity determines whether the potential ordinary shares may be assumed to be issuable on the basis of the conditions specified for their issue in accordance with the contingent ordinary share provisions in paragraphs 52–56; and (b) if those potential ordinary shares should be reflected in diluted earnings per share, an entity determines their impact on the calculation of diluted earnings per share by following the provisions for options and warrants in paragraphs 45–48, the provisions for convertible instruments in paragraphs 49–51, the provisions for contracts that may be settled in ordinary shares or cash in paragraphs 58–61, or other provisions, as appropriate. However, exercise or conversion is not assumed for the purpose of calculating diluted earnings per share unless exercise or conversion of similar outstanding potential ordinary shares that are not contingently issuable is assumed. Contracts that may be settled in ordinary shares or cash 58 When an entity has issued a contract that may be settled in ordinary shares or cash at the entity’s option, the entity shall presume that the contract will be settled in ordinary shares, and the resulting potential ordinary shares shall be included in diluted earnings per share if the effect is dilutive. 59 When such a contract is presented for accounting purposes as an asset or a liability, or has an equity component and a liability component, the entity shall adjust the numerator for any changes in profit or loss that would have resulted during the period if the contract had been classified wholly as an equity instrument. That adjustment is similar to the adjustments required in paragraph 33. 60 For contracts that may be settled in ordinary shares or cash at the holder’s option, the more dilutive of cash settlement and share settlement shall be used in calculating diluted earnings per share. 61 An example of a contract that may be settled in ordinary shares or cash is a debt instrument that, on maturity, gives the entity the unrestricted right to settle the principal amount in cash or in its own ordinary shares. Another example is a written put option that gives the holder a choice of settling in ordinary shares or cash. ? IASCF 11 IAS 33 Purchased options 62 Contracts such as purchased put options and purchased call options (ie options held by the entity on its own ordinary shares) are not included in the calculation of diluted earnings per share because including them would be antidilutive. The put option would be exercised only if the exercise price were higher than the market price and the call option would be exercised only if the exercise price were lower than the market price. Written put options 63 Contracts that require the entity to repurchase its own shares, such as written put options and forward purchase contracts, are reflected in the calculation of diluted earnings per share if the effect is dilutive. If these contracts are ‘in the money’ during the period (ie the exercise or settlement price is above the average market price for that period), the potential dilutive effect on earnings per share shall be calculated as follows: (a) it shall be assumed that at the beginning of the period sufficient ordinary shares will be issued (at the average market price during the period) to raise proceeds to satisfy the contract; (b) it shall be assumed that the proceeds from the issue are used to satisfy the contract (ie to buy back ordinary shares); and (c) the incremental ordinary shares (the difference between the number of ordinary shares assumed issued and the number of ordinary shares received from satisfying the contract) shall be included in the calculation of diluted earnings per share. Retrospective adjustments 64 If the number of ordinary or potential ordinary shares outstanding increases as a result of a capitalisation, bonus issue or share split, or decreases as a result of a reverse share split, the calculation of basic and diluted earnings per share for all periods presented shall be adjusted retrospectively. If these changes occur after the reporting period but before the financial statements are authorised for issue, the per share calculations for those and any prior period financial statements presented shall be based on the new number of shares. The fact that per share calculations reflect such changes in the number of shares shall be disclosed. In addition, basic and diluted earnings per share of all periods presented shall be adjusted for the effects of errors and adjustments resulting from changes in accounting policies accounted for retrospectively. 65 An entity does not 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. Presentation 66 An entity shall present in the statement of comprehensive income basic and diluted earnings per share for profit or loss from continuing operations attributable to the ordinary equity holders of the parent entity and for profit or loss attributable to the ordinary equity holders of the parent entity for the period for each class of ordinary shares that has a different right to share in profit for the period. An entity shall present basic and diluted earnings per share with equal prominence for all periods presented. 67 Earnings per share is presented for every period for which a statement of comprehensive income is presented. If diluted earnings per share is reported for at least one period, it shall be reported for all periods presented, even if it equals basic earnings per share. If basic and diluted earnings per share are equal, dual presentation can be accomplished in one line in the statement of comprehensive income. 67A If an entity presents the components of profit or loss in a separate income statement as described in paragraph 81 of IAS 1 (as revised in 2007), it presents basic and diluted earnings per share, as required in paragraphs 66 and 67, in that separate statement. 68 An entity that reports a discontinued operation shall disclose the basic and diluted amounts per share for the discontinued operation either in the statement of comprehensive income or in the notes. 68A If an entity presents the components of profit or loss in a separate income statement as described in paragraph 81 of IAS 1 (as revised in 2007), it presents basic and diluted earnings per share for the discontinued operation, as required in paragraph 68, in that separate statement or in the notes. 12 ? IASCF IAS 33 69 An entity shall present basic and diluted earnings per share, even if the amounts are negative (ie a loss per share). Disclosure 70 An entity shall disclose the following: (a) the amounts used as the numerators in calculating basic and diluted earnings per share, and a reconciliation of those amounts to profit or loss attributable to the parent entity for the period. The reconciliation shall include the individual effect of each class of instruments that affects earnings per share. (b) the weighted average number of ordinary shares used as the denominator in calculating basic and diluted earnings per share, and a reconciliation of these denominators to each other. The reconciliation shall include the individual effect of each class of instruments that affects earnings per share. (c) instruments (including contingently issuable shares) that could potentially dilute basic earnings per share in the future, but were not included in the calculation of diluted earnings per share because they are antidilutive for the period(s) presented. (d) a description of ordinary share transactions or potential ordinary share transactions, other than those accounted for in accordance with paragraph 64, that occur after the reporting period and that would have changed significantly the number of ordinary shares or potential ordinary shares outstanding at the end of the period if those transactions had occurred before the end of the reporting period. 71 Examples of transactions in paragraph 70(d) include: (a) an issue of shares for cash; (b) an issue of shares when the proceeds are used to repay debt or preference shares outstanding at the end of the reporting period; (c) the redemption of ordinary shares outstanding; (d) the conversion or exercise of potential ordinary shares outstanding at the end of the reporting period into ordinary shares; (e) an issue of options, warrants, or convertible instruments; and (f) the achievement of conditions that would result in the issue of contingently issuable shares. Earnings per share amounts are not adjusted for such transactions occurring after the reporting period because such transactions do not affect the amount of capital used to produce profit or loss for the period. 72 Financial instruments and other contracts generating potential ordinary shares may incorporate terms and conditions that affect the measurement of basic and diluted earnings per share. These terms and conditions may determine whether any potential ordinary shares are dilutive and, if so, the effect on the weighted average number of shares outstanding and any consequent adjustments to profit or loss attributable to ordinary equity holders. The disclosure of the terms and conditions of such financial instruments and other contracts is encouraged, if not otherwise required (see IFRS 7 Financial Instruments: Disclosures). 73 If an entity discloses, in addition to basic and diluted earnings per share, amounts per share using a reported component of the statement of comprehensive income other than one required by this Standard, such amounts shall be calculated using the weighted average number of ordinary shares determined in accordance with this Standard. Basic and diluted amounts per share relating to such a component shall be disclosed with equal prominence and presented in the notes. An entity shall indicate the basis on which the numerator(s) is (are) determined, including whether amounts per share are before tax or after tax. If a component of the statement of comprehensive income is used that is not reported as a line item in the statement of comprehensive income, a reconciliation shall be provided between the component used and a line item that is reported in the statement of comprehensive income. 73A Paragraph 73 applies also to an entity that discloses, in addition to basic and diluted earnings per share, amounts per share using a reported component of the separate income statement (as described in paragraph 81 of IAS 1 (as revised in 2007)), other than one required by this Standard. ? IASCF 13 IAS 33 Effective date 74 An entity shall apply this Standard for annual periods beginning on or after 1 January 2005. Earlier application is encouraged. If an entity applies the Standard for a period beginning before 1 January 2005, it shall disclose that fact. 74A IAS 1 (as revised in 2007) amended the terminology used throughout IFRSs. In addition it added paragraphs 4A, 67A, 68A and 73A. An entity shall apply those amendments for annual periods beginning on or after 1 January 2009. If an entity applies IAS 1 (revised 2007) for an earlier period, the amendments shall be applied for that earlier period. Withdrawal of other pronouncements 75 This Standard supersedes IAS 33 Earnings Per Share (issued in 1997). 76 This Standard supersedes SIC-24 Earnings Per Share—Financial Instruments and Other Contracts that May Be Settled in Shares. 14 ? IASCF IAS 33 Appendix A Application guidance This appendix is an integral part of the Standard. Profit or loss attributable to the parent entity A1 For the purpose of calculating earnings per share based on the consolidated financial statements, profit or loss attributable to the parent entity refers to profit or loss of the consolidated entity after adjusting for non- controlling interests. Rights issues A2 The issue of ordinary shares at the time of exercise or conversion of potential ordinary shares does not usually give rise to a bonus element. This is because the potential ordinary shares are usually issued for full value, resulting in a proportionate change in the resources available to the entity. In a rights issue, however, the exercise price is often less than the fair value of the shares. Therefore, as noted in paragraph 27(b), such a rights issue includes a bonus element. If a rights issue is offered to all existing shareholders, the number of ordinary shares to be used in calculating basic and diluted earnings per share for all periods before the rights issue is the number of ordinary shares outstanding before the issue, multiplied by the following factor: Fair value per share immediately before the exercise of rights Theoretical ex-rights fair value per share The theoretical ex-rights fair value per share is calculated by adding the aggregate market value of the shares immediately before the exercise of the rights to the proceeds from the exercise of the rights, and dividing by the number of shares outstanding after the exercise of the rights. Where the rights are to be publicly traded separately from the shares before the exercise date, fair value for the purposes of this calculation is established at the close of the last day on which the shares are traded together with the rights. Control number A3 To illustrate the application of the control number notion described in paragraphs 42 and 43, assume that an *entity has profit from continuing operations attributable to the parent entity of CU4,800, a loss from discontinued operations attributable to the parent entity of (CU7,200), a loss attributable to the parent entity of (CU2,400), and 2,000 ordinary shares and 400 potential ordinary shares outstanding. The entity’s basic earnings per share is CU2.40 for continuing operations, (CU3.60) for discontinued operations and (CU1.20) for the loss. The 400 potential ordinary shares are included in the diluted earnings per share calculation because the resulting CU2.00 earnings per share for continuing operations is dilutive, assuming no profit or loss impact of those 400 potential ordinary shares. Because profit from continuing operations attributable to the parent entity is the control number, the entity also includes those 400 potential ordinary shares in the calculation of the other earnings per share amounts, even though the resulting earnings per share amounts are antidilutive to their comparable basic earnings per share amounts, ie the loss per share is less [(CU3.00) per share for the loss from discontinued operations and (CU1.00) per share for the loss]. Average market price of ordinary shares A4 For the purpose of calculating diluted earnings per share, the average market price of ordinary shares assumed to be issued is calculated on the basis of the average market price of the ordinary shares during the period. Theoretically, every market transaction for an entity’s ordinary shares could be included in the determination of the average market price. As a practical matter, however, a simple average of weekly or monthly prices is usually adequate. * In this guidance, monetary amounts are denominated in ‘currency units (CU)’. ? IASCF 15 IAS 33 A5 Generally, closing market prices are adequate for calculating the average market price. When prices fluctuate widely, however, an average of the high and low prices usually produces a more representative price. The method used to calculate the average market price is used consistently unless it is no longer representative because of changed conditions. For example, an entity that uses closing market prices to calculate the average market price for several years of relatively stable prices might change to an average of high and low prices if prices start fluctuating greatly and the closing market prices no longer produce a representative average price. Options, warrants and their equivalents A6 Options or warrants to purchase convertible instruments are assumed to be exercised to purchase the convertible instrument whenever the average prices of both the convertible instrument and the ordinary shares obtainable upon conversion are above the exercise price of the options or warrants. However, exercise is not assumed unless conversion of similar outstanding convertible instruments, if any, is also assumed. A7 Options or warrants may permit or require the tendering of debt or other instruments of the entity (or its parent or a subsidiary) in payment of all or a portion of the exercise price. In the calculation of diluted earnings per share, those options or warrants have a dilutive effect if (a) the average market price of the related ordinary shares for the period exceeds the exercise price or (b) the selling price of the instrument to be tendered is below that at which the instrument may be tendered under the option or warrant agreement and the resulting discount establishes an effective exercise price below the market price of the ordinary shares obtainable upon exercise. In the calculation of diluted earnings per share, those options or warrants are assumed to be exercised and the debt or other instruments are assumed to be tendered. If tendering cash is more advantageous to the option or warrant holder and the contract permits tendering cash, tendering of cash is assumed. Interest (net of tax) on any debt assumed to be tendered is added back as an adjustment to the numerator. A8 Similar treatment is given to preference shares that have similar provisions or to other instruments that have conversion options that permit the investor to pay cash for a more favourable conversion rate. A9 The underlying terms of certain options or warrants may require the proceeds received from the exercise of those instruments to be applied to redeem debt or other instruments of the entity (or its parent or a subsidiary). In the calculation of diluted earnings per share, those options or warrants are assumed to be exercised and the proceeds applied to purchase the debt at its average market price rather than to purchase ordinary shares. However, the excess proceeds received from the assumed exercise over the amount used for the assumed purchase of debt are considered (ie assumed to be used to buy back ordinary shares) in the diluted earnings per share calculation. Interest (net of tax) on any debt assumed to be purchased is added back as an adjustment to the numerator. Written put options A10 To illustrate the application of paragraph 63, assume that an entity has outstanding 120 written put options on its ordinary shares with an exercise price of CU35. The average market price of its ordinary shares for the period is CU28. In calculating diluted earnings per share, the entity assumes that it issued 150 shares at CU28 per share at the beginning of the period to satisfy its put obligation of CU4,200. The difference between the 150 ordinary shares issued and the 120 ordinary shares received from satisfying the put option (30 incremental ordinary shares) is added to the denominator in calculating diluted earnings per share. Instruments of subsidiaries, joint ventures or associates A11 Potential ordinary shares of a subsidiary, joint venture or associate convertible into either ordinary shares of the subsidiary, joint venture or associate, or ordinary shares of the parent, venturer or investor (the reporting entity) are included in the calculation of diluted earnings per share as follows: (a) instruments issued by a subsidiary, joint venture or associate that enable their holders to obtain ordinary shares of the subsidiary, joint venture or associate are included in calculating the diluted earnings per share data of the subsidiary, joint venture or associate. Those earnings per share are then included in the reporting entity’s earnings per share calculations based on the reporting entity’s holding of the instruments of the subsidiary, joint venture or associate. (b) instruments of a subsidiary, joint venture or associate that are convertible into the reporting entity’s ordinary shares are considered among the potential ordinary shares of the reporting entity for the purpose of calculating diluted earnings per share. Likewise, options or warrants issued by a subsidiary, joint venture or associate to purchase ordinary shares of the reporting entity are considered among the potential ordinary shares of the reporting entity in the calculation of consolidated diluted earnings per share. 16 ? IASCF IAS 33 A12 For the purpose of determining the earnings per share effect of instruments issued by a reporting entity that are convertible into ordinary shares of a subsidiary, joint venture or associate, the instruments are assumed to be converted and the numerator (profit or loss attributable to ordinary equity holders of the parent entity) adjusted as necessary in accordance with paragraph 33. In addition to those adjustments, the numerator is adjusted for any change in the profit or loss recorded by the reporting entity (such as dividend income or equity method income) that is attributable to the increase in the number of ordinary shares of the subsidiary, joint venture or associate outstanding as a result of the assumed conversion. The denominator of the diluted earnings per share calculation is not affected because the number of ordinary shares of the reporting entity outstanding would not change upon assumed conversion. Participating equity instruments and two-class ordinary shares A13 The equity of some entities includes: (a) instruments that participate in dividends with ordinary shares according to a predetermined formula (for example, two for one) with, at times, an upper limit on the extent of participation (for example, up to, but not beyond, a specified amount per share). (b) a class of ordinary shares with a different dividend rate from that of another class of ordinary shares but without prior or senior rights. A14 For the purpose of calculating diluted earnings per share, conversion is assumed for those instruments described in paragraph A13 that are convertible into ordinary shares if the effect is dilutive. For those instruments that are not convertible into a class of ordinary shares, profit or loss for the period is allocated to the different classes of shares and participating equity instruments in accordance with their dividend rights or other rights to participate in undistributed earnings. To calculate basic and diluted earnings per share: (a) profit or loss attributable to ordinary equity holders of the parent entity is adjusted (a profit reduced and a loss increased) by the amount of dividends declared in the period for each class of shares and by the contractual amount of dividends (or interest on participating bonds) that must be paid for the period (for example, unpaid cumulative dividends). (b) the remaining profit or loss is allocated to ordinary shares and participating equity instruments to the extent that each instrument shares in earnings as if all of the profit or loss for the period had been distributed. The total profit or loss allocated to each class of equity instrument is determined by adding together the amount allocated for dividends and the amount allocated for a participation feature. (c) the total amount of profit or loss allocated to each class of equity instrument is divided by the number of outstanding instruments to which the earnings are allocated to determine the earnings per share for the instrument. For the calculation of diluted earnings per share, all potential ordinary shares assumed to have been issued are included in outstanding ordinary shares. Partly paid shares A15 Where ordinary shares are issued but not fully paid, they are treated in the calculation of basic earnings per share as a fraction of an ordinary share to the extent that they were entitled to participate in dividends during the period relative to a fully paid ordinary share. A16 To the extent that partly paid shares are not entitled to participate in dividends during the period they are treated as the equivalent of warrants or options in the calculation of diluted earnings per share. The unpaid balance is assumed to represent proceeds used to purchase ordinary shares. The number of shares included in diluted earnings per share is the difference between the number of shares subscribed and the number of shares assumed to be purchased. ? IASCF 17 IAS 33 Appendix B Amendments to other pronouncements The amendments in this appendix shall be applied for annual periods beginning on or after 1 January 2005. If an entity applies this Standard for an earlier period, these amendments shall be applied for that earlier period. * * * * * The amendments contained in this appendix when this Standard was revised in 2003 have been incorporated into the relevant pronouncements published in this volume. 18 ? IASCF IAS 33 Approval by the Board of IAS 33 issued in December 2003 International Accounting Standard 33 Earnings per Share (as revised in 2003) was approved for issue by the fourteen members of the International Accounting Standards Board. Sir David Tweedie Chairman Thomas E Jones Vice-Chairman Mary E Barth Hans-Georg Bruns Anthony T Cope Robert P Garnett Gilbert Gélard James J Leisenring Warren J McGregor Patricia L O’Malley Harry K Schmid John T Smith Geoffrey Whittington Tatsumi Yamada ? IASCF 19 IAS 33 BC Basis for Conclusions on IAS 33 Earnings per Share This Basis for Conclusions accompanies, but is not part of, IAS 33. Introduction BC1 This Basis for Conclusions summarises the International Accounting Standards Board’s considerations in reaching its conclusions on revising IAS 33 Earnings Per Share in 2003. Individual Board members gave greater weight to some factors than to others. BC2 In July 2001 the Board announced that, as part of its initial agenda of technical projects, it would undertake a project to improve a number of Standards, including IAS 33. The project was undertaken in the light of queries and criticisms raised in relation to the Standards by securities regulators, professional accountants and other interested parties. The objectives of the Improvements project were to reduce or eliminate alternatives, redundancies and conflicts within Standards, to deal with some convergence issues and to make other improvements. In May 2002 the Board published its proposals in an Exposure Draft of Improvements to International Accounting Standards, with a comment deadline of 16 September 2002. The Board received over 160 comment letters on the Exposure Draft. BC3 Because the Board’s intention was not to reconsider the fundamental approach to the determination and presentation of earnings per share established by IAS 33, this Basis for Conclusions does not discuss requirements in IAS 33 that the Board has not reconsidered. Presentation of parent’s separate earnings per share BC4 The Exposure Draft published in May 2002 proposed deleting paragraphs 2 and 3 of the previous version of IAS 33, which stated that when the parent’s separate financial statements and consolidated financial statements are presented, earnings per share need be presented only on the basis of consolidated information. BC5 Some respondents expressed concern that the presentation of two earnings per share figures (one for the parent’s separate financial statements and one for the consolidated financial statements) might be misleading. BC6 The Board noted that disclosing the parent’s separate earnings per share amount is useful in limited situations, and therefore decided to retain the option. However, the Board decided that the Standard should prohibit presentation of the parent’s separate earnings per share amounts in the consolidated financial statements (either on the face of the financial statements or in the notes). Contracts that may be settled in ordinary shares or cash BC7 The Exposure Draft proposed that an entity should include in the calculation of the number of potential ordinary shares in the diluted earnings per share calculation contracts that may be settled in ordinary shares or cash, at the issuer’s option, based on a rebuttable presumption that the contracts will be settled in shares. This proposed presumption could be rebutted if the issuer had acted through an established pattern of past practice, published policies, or by having made a sufficiently specific current statement indicating to other parties the manner in which it expected to settle, and, as a result, the issuer had created a valid expectation on the part of those other parties that it would settle in a manner other than by issuing shares. BC8 The majority of the respondents on the Exposure Draft agreed with the proposed treatment of contracts that may be settled in ordinary shares or cash at the issuer’s option. However, the Board decided to withdraw the notion of a rebuttable presumption and to incorporate into the Standard the requirements of SIC-24 Earnings Per Share—Financial Instruments and Other Contracts that May Be Settled in Shares. SIC-24 requires financial instruments or other contracts that may result in the issue of ordinary shares of the entity to be considered potential ordinary shares of the entity. BC9 Although the proposed treatment would have converged with that required by several liaison standard-setters, for example, in US SFAS 128 Earnings per Share, the Board concluded that the notion of a rebuttable presumption is inconsistent with the stated objective of diluted earnings per share. The US Financial Accounting Standards Board has agreed to consider this difference as part of the joint short-term convergence project with the IASB. 20 ? IASCF IAS 33 BC Calculation of year-to-date diluted earnings per share BC10 The Exposure Draft proposed the following approach to the year-to-date calculation of diluted earnings per share: (a) The number of potential ordinary shares is a year-to-date weighted average of the number of potential ordinary shares included in each interim diluted earnings per share calculation, rather than a year-to- date weighted average of the number of potential ordinary shares weighted for the period they were outstanding (ie without regard for the diluted earnings per share information reported during the interim periods). (b) The number of potential ordinary shares is computed using the average market price during the interim periods, rather than using the average market price during the year-to-date period. (c) Contingently issuable shares are weighted for the interim periods in which they were included in the computation of diluted earnings per share, rather than being included in the computation of diluted earnings per share (if the conditions are satisfied) from the beginning of the year-to-date reporting period (or from the date of the contingent share agreement, if later). BC11 The majority of the respondents on the Exposure Draft disagreed with the proposed approach to the year-to-date calculation of diluted earnings per share. The most significant argument against the proposed approach was that the proposed calculation of diluted earnings per share could result in an amount for year-to-date diluted earnings per share that was different for entities that report more frequently, for example, on a quarterly or half-yearly basis, and for entities that report only annually. It was also noted that this problem would be exacerbated for entities with seasonal businesses. BC12 The Board considered whether to accept that differences in the frequency of interim reporting would result in different earnings per share amounts being reported. However, IAS 34 Interim Financial Reporting states ‘the frequency of an entity’s reporting (annual, half-yearly, or quarterly) should not affect the measurement of its annual results. To achieve that objective, measurements for interim reporting purposes should be made on a year-to-date basis.’ BC13 The Board also considered whether it could mandate the frequency of interim reporting to ensure consistency between all entities preparing financial statements in accordance with IFRSs, ie those that are brought within the scope of IAS 33 by virtue of issuing publicly traded instruments or because they elect to present earnings per share. However, IAS 34 states that, ‘This Standard does not mandate which entities should be required to publish interim financial reports, how frequently, or how soon after the end of an interim period.’ The frequency of interim reporting is mandated by securities regulators, stock exchanges, governments, and accountancy bodies, and varies by jurisdiction. BC14 Although the proposed approach for the calculation of year-to-date diluted earnings per share would have converged with US SFAS 128, the Board concluded that the approach was inconsistent with IAS 34 and that it could not mandate the frequency of interim reporting. The US Financial Accounting Standards Board has agreed to consider this difference as part of the joint short-term convergence project with the IASB as well as the issue noted in paragraph BC9. Other changes BC15 Implementation questions have arisen since the previous version of IAS 33 was issued, typically concerning the application of the Standard to complex capital structures and arrangements. In response, the Board decided to provide additional application guidance in the Appendix as well as illustrative examples on more complex matters that were not addressed in the previous version of IAS 33. These matters include the effects of contingently issuable shares, potential ordinary shares of subsidiaries, joint ventures or associates, participating equity instruments, written put options, and purchased put and call options. ? IASCF 21 IAS 33 IE CONTENTS paragraphs IAS 33 EARNINGS PER SHARE ILLUSTRATIVE EXAMPLES Example 1 Increasing rate preference shares Example 2 Weighted average number of ordinary shares Example 3 Bonus issue Example 4 Rights issue Example 5 Effects of share options on diluted earnings per share Example 5A Determining the exercise price of employee share options Example 6 Convertible bonds Example 7 Contingently issuable shares Example 8 Convertible bonds settled in shares or cash at the issuer's option Example 9 Calculation of weighted average number of shares: determining the order in which to include dilutive instruments Example 10 Instruments of a subsidiary: calculation of basic and diluted earnings per share Example 11 Participating equity instruments and two-class ordinary shares Example 12 Calculation and presentation of basic and diluted earnings per share (comprehensive example) 22 ? IASCF IAS 33 IE IAS 33 Earnings per Share Illustrative examples These examples accompany, but are not part of, IAS 33. Example 1 Increasing rate preference shares Reference: IAS 33, paragraphs 12 and 15 Entity D issued non-convertible, non-redeemable class A cumulative preference shares of CU100 par value on 1 January 20X1. The class A preference shares are entitled to a cumulative annual dividend of CU7 per share starting in 20X4. At the time of issue, the market rate dividend yield on the class A preference shares was 7 per cent a year. Thus, Entity D could have expected to receive proceeds of approximately CU100 per class A preference share if the dividend rate of CU7 per share had been in effect at the date of issue. In consideration of the dividend payment terms, however, the class A preference shares were issued at CU81.63 per share, ie at a discount of CU18.37 per share. The issue price can be calculated by taking the present value of CU100, discounted at 7 per cent over a three-year period. Because the shares are classified as equity, the original issue discount is amortised to retained earnings using the effective interest method and treated as a preference dividend for earnings per share purposes. To calculate basic earnings per share, the following imputed dividend per class A preference share is deducted to determine the profit or loss attributable to ordinary equity holders of the parent entity: Year Carrying Imputed dividend abamount of Carrying amount Dividend paid class A of class A preference preference shares 1 shares 31 January December CU CU CU CU 20X1 81.63 5.71 87.34 – 20X2 87.34 6.12 93.46 – 20X3 93.46 6.54 100.00 – Thereafter: 100.00 7.00 107.00 (7.00) a at 7% b This is before dividend payment. ? IASCF 23 IAS 33 IE Example 2 Weighted average number of ordinary shares Reference: IAS 33, paragraphs 19–21 a Shares Treasury Shares issued shares outstanding 1 January 20X1 Balance at beginning of year 2,000 300 1,700 31 May 20X1 Issue of new shares for cash 800 – 2,500 1 December 20X1 Purchase of treasury shares for cash – 250 2,250 31 December 20X1 Balance at year-end 2,800 550 2,250 Calculation of weighted average: (1,700 x 561/) + (2,500 x /) + (2,250 x /) = 2,146 shares or 121212 1271(1,700 x /) + (800 x /) – (250 x /) = 2,146 shares 121212 a Treasury shares are equity instruments reacquired and held by the issuing entity itself or by its subsidiaries. 24 ? IASCF IAS 33 IE Example 3 Bonus issue Reference: IAS 33, paragraphs 26, 27(a) and 28 Profit attributable to ordinary equity holders of the parent entity 20X0 CU180 Profit attributable to ordinary equity holders of the parent entity 20X1 CU600 Ordinary shares outstanding until 30 September 20X1 200 Bonus issue 1 October 20X1 2 ordinary shares for each ordinary share outstanding at 30 September 20X1 200 × 2 = 400 CU600 Basic earnings per share 20X1 = CU1.00 (200 + 400) CU180 Basic earnings per share 20X0 = CU0.30 (200 + 400) Because the bonus issue was without consideration, it is treated as if it had occurred before the beginning of 20X0, the earliest period presented. ? IASCF 25 IAS 33 IE Example 4 Rights issue Reference: IAS 33, paragraphs 26, 27(b) and A2 20X0 20X1 20X2 Profit attributable to ordinary equity holders of the parent entity CU1,100 CU1,500 CU1,800 Shares outstanding before rights issue 500 shares Rights issue One new share for each five outstanding shares (100 new shares total) Exercise price: CU5.00 Date of rights issue: 1 January 20X1 Last date to exercise rights: 1 March 20X1 Market price of one ordinary share immediately before exercise on 1 March 20X1: CU11.00 End of the reporting period 31 December Calculation of theoretical ex-rights value per share Fair value of all outstanding shares before the exercise of rights + total amount received from exercise of rights Number of shares outstanding before exercise + number of shares issued in the exercise (CU11.00 × 500 shares) + (CU5.00 × 100 shares) 500 shares + 100 shares Theoretical ex-rights value per share = CU10.00 Calculation of adjustment factor Fair value per share before exercise of rights CU11.00 = 1.10 Theoretical ex-rights value per share CU10.00 26 ? IASCF IAS 33 IE Calculation of basic earnings per share 20X0 20X1 20X2 20X0 basic EPS as originally reported: CU1,100 ? 500 shares CU2.20 20X0 basic EPS restated for rights issue: CU1,100 (500 shares × 1.1) CU2.00 20X1 basic EPS including effects of rights CU1,500 issue: (500 × 1.1 × 210/) + (600 × /) CU2.54 1212 20X2 basic EPS: CU1,800 ? 600 shares CU3.00 Example 5 Effects of share options on diluted earnings per share Reference: IAS 33, paragraphs 45–47 Profit attributable to ordinary equity holders of the parent entity for year 20X1 CU1,200,000 Weighted average number of ordinary shares outstanding during year 20X1 500,000 shares Average market price of one ordinary share during year 20X1 CU20.00 Weighted average number of shares under option during year 20X1 100,000 shares Exercise price for shares under option during year 20X1 CU15.00 Calculation of earnings per share Earnings Shares Per share Profit attributable to ordinary equity holders of the parent entity for year 20X1 CU1,200,000 Weighted average shares outstanding during year 20X1 500,000 Basic earnings per share CU2.40 Weighted average number of shares under option 100,000 Weighted average number of shares that would have been issued at average market price: (100,000 × CU15.00) ? CU20.00 a (75,000) Diluted earnings per share CU1,200,000 525,000 CU2.29 a Earnings have not increased because the total number of shares has increased only by the number of shares (25,000) deemed to have been issued for no consideration (see paragraph 46(b) of the Standard). ? IASCF 27 IAS 33 IE Example 5A Determining the exercise price of employee share options Weighted average number of unvested share options per employee 1,000 Weighted average amount per employee to be recognised over the remainder of the vesting period for employee services to be rendered as consideration for the share options, determined in accordance with IFRS 2 Share-based Payment CU1,200 Cash exercise price of unvested share options CU15 Calculation of adjusted exercise price Fair value of services yet to be rendered per employee: CU1,200 Fair value of services yet to be rendered per option: (CU1,200 ? 1,000) CU1.20 Total exercise price of share options: (CU15.00 + CU1.20) CU16.20 *Example 6 Convertible bonds Reference: IAS 33, paragraphs 33, 34, 36 and 49 Profit attributable to ordinary equity holders of the parent entity CU1,004 Ordinary shares outstanding 1,000 Basic earnings per share CU1.00 Convertible bonds 100 Each block of 10 bonds is convertible into three ordinary shares Interest expense for the current year relating to the liability component of the convertible bonds CU10 Current and deferred tax relating to that interest expense CU4 Note: the interest expense includes amortisation of the discount arising on initial recognition of the liability component (see IAS 32 Financial Instruments: Presentation). Adjusted profit attributable to ordinary equity holders of the parent entity CU1,004 + CU10 – * This example does not illustrate the classification of the components of convertible financial instruments as liabilities and equity or the classification of related interest and dividends as expenses and equity as required by IAS 32. 28 ? IASCF IAS 33 IE CU4 = CU1,010 Number of ordinary shares resulting from conversion of bonds 30 Number of ordinary shares used to calculate diluted earnings per share 1,000 + 30 = 1,030 Diluted earnings per share CU1,010 = CU0.98 1,030 Example 7 Contingently issuable shares Reference: IAS 33, paragraphs 19, 24, 36, 37, 41–43 and 52 Ordinary shares outstanding during 20X1 1,000,000 (there were no options, warrants or convertible instruments outstanding during the period) An agreement related to a recent business combination provides for the issue of additional ordinary shares based on the following conditions: 5,000 additional ordinary shares for each new retail site opened during 20X1 1,000 additional ordinary shares for each CU1,000 of consolidated profit in excess of CU2,000,000 for the year ended 31 December 20X1 Retail sites opened during the year: one on 1 May 20X1 one on 1 September 20X1 Consolidated year-to-date profit attributable to ordinary equity holders of the parent entity: CU1,100,000 as of 31 March 20X1 CU2,300,000 as of 30 June 20X1 CU1,900,000 as of 30 September 20X1 (including a CU450,000 loss from a discontinued operation) CU2,900,000 as of 31 December 20X1 ? IASCF 29 IAS 33 IE Basic earnings per share First Second Third Fourth quarter quarter quarter quarter Full year Numerator (CU) 1,100,000 1,200,000 (400,000) 1,000,000 2,900,000 Denominator: Ordinary shares outstanding 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 Retail site contingency – 3,333 abc 6,667 10,000 5,000 dEarnings contingency – – – – – Total shares 1,000,000 1,003,333 1,006,667 1,010,000 1,005,000 Diluted earnings per share (CU) 1.10 1.20 (0.40) 0.99 2.89 2a 5,000 shares × / 31b 5,000 shares + (5,000 shares × /) 384c (5,000 shares × /) + (5,000 shares × /) 1212 d The earnings contingency has no effect on basic earnings per share because it is not certain that the condition is satisfied until the end of the contingency period. The effect is negligible for the fourth-quarter and full-year calculations because it is not certain that the condition is met until the last day of the period. Diluted earnings per share First Second Third Fourth Full year quarter quarter quarter quarter Numerator (CU) 1,100,000 1,200,000 (400,000) 1,000,000 2,900,000 Denominator: Ordinary shares outstanding 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 Retail site contingency – 5,000 10,000 10,000 10,000 Earnings contingency – abcd(h) 300,000 – 900,000 900,000 Total shares 1,000,000 1,305,000 1,010,000 1,910,000 1,910,000 Diluted earnings per share e(CU) 1.10 0.92 (0.40) 0.52 1.52 a Company A does not have year-to-date profit exceeding CU2,000,000 at 31 March 20X1. The Standard does not permit projecting future earnings levels and including the related contingent shares. 30 ? IASCF IAS 33 IE b [(CU2,300,000 ? CU2,000,000) ‚ 1,000] × 1,000 shares = 300,000 shares. c Year-to-date profit is less than CU2,000,000. d [(CU2,900,000 ? CU2,000,000) ‚ 1,000] × 1,000 shares = 900,000 shares. e Because the loss during the third quarter is attributable to a loss from a discontinued operation, the antidilution rules do not apply. The control number (ie profit or loss from continuing operations attributable to the equity holders of the parent entity) is positive. Accordingly, the effect of potential ordinary shares is included in the calculation of diluted earnings per share. Example 8 Convertible bonds settled in shares or cash at the issuer’s option Reference: IAS 33, paragraphs 31–33, 36, 58 and 59 An entity issues 2,000 convertible bonds at the beginning of Year 1. The bonds have a three-year term, and are issued at par with a face value of CU1,000 per bond, giving total proceeds of CU2,000,000. Interest is payable annually in arrears at a nominal annual interest rate of 6 per cent. Each bond is convertible at any time up to maturity into 250 ordinary shares. The entity has an option to settle the principal amount of the convertible bonds in ordinary shares or in cash. When the bonds are issued, the prevailing market interest rate for similar debt without a conversion option is 9 per cent. At the issue date, the market price of one ordinary share is CU3. Income tax is ignored. Profit attributable to ordinary equity holders of the parent entity Year 1 CU1,000,000 Ordinary shares outstanding 1,200,000 Convertible bonds outstanding 2,000 Allocation of proceeds of the bond issue: Liability component CU1,848,122 a Equity component CU151,878 CU2,000,000 a This represents the present value of the principal and interest discounted at 9% – CU2,000,000 payable at the end of three years; CU120,000 payable annually in arrears for three years. The liability and equity components would be determined in accordance with IAS 32 Financial Instruments: Presentation. These amounts are recognised as the initial carrying amounts of the liability and equity components. The amount assigned to the issuer conversion option equity element is an addition to equity and is not adjusted. Basic earnings per share Year 1: CU1,000,000 = CU0.83 per ordinary share 1,200,000 Diluted earnings per share Year 1: It is presumed that the issuer will settle the contract by the issue of ordinary shares. The dilutive effect is therefore calculated in accordance with paragraph 59 of the Standard. CU1,000,000 + CU166,331a = CU0.69 per ordinary share b1,200,000 + 500,000 a Profit is adjusted for the accretion of CU166,331 (CU1,848,122 × 9%) of the liability because of the passage of time. b 500,000 ordinary shares = 250 ordinary shares × 2,000 convertible bonds ? IASCF 31 IAS 33 IE Example 9 Calculation of weighted average number of shares: *determining the order in which to include dilutive instruments Primary reference: IAS 33, paragraph 44 Secondary reference: IAS 33, paragraphs 10, 12, 19, 31–33, 36, 41–47, 49 and 50 Earnings CU Profit from continuing operations attributable to the parent entity 16,400,000 Less dividends on preference shares (6,400,000) Profit from continuing operations attributable to ordinary equity holders of the parent entity 10,000,000 Loss from discontinued operations attributable to the parent entity (4,000,000) Profit attributable to ordinary equity holders of the parent entity 6,000,000 Ordinary shares outstanding 2,000,000 Average market price of one ordinary share during year CU75.00 Potential ordinary shares Options 100,000 with exercise price of CU60 Convertible preference shares 800,000 shares with a par value of CU100 entitled to a cumulative dividend of CU8 per share. Each preference share is convertible to two ordinary shares. 5% convertible bonds Nominal amount CU100,000,000. Each CU1,000 bond is convertible to 20 ordinary shares. There is no amortisation of premium or discount affecting the determination of interest expense. Tax rate 40% * This example does not illustrate the classification of the components of convertible financial instruments as liabilities and equity or the classification of related interest and dividends as expenses and equity as required by IAS 32. 32 ? IASCF IAS 33 IE Increase in earnings attributable to ordinary equity holders on conversion of potential ordinary shares Increase Increase in Earnings in number of per earnings ordinary incremental shares share CU CU Options Increase in earnings Nil Incremental shares issued for no 100,000 × (CU75 – CU60) ? CU75 20,000 Nil consideration Convertible preference shares Increase in profit CU800,000 × 100 × 0.08 6,400,000 Incremental shares 2 × 800,000 1,600,000 4.00 5% convertible bonds Increase in profit CU100,000,000 × 0.05 × (1 – 0.40) 3,000,000 Incremental shares 100,000 × 20 2,000,000 1.50 The order in which to include the dilutive instruments is therefore: 1 Options 2 5% convertible bonds 3 Convertible preference shares ? IASCF 33 IAS 33 IE Calculation of diluted earnings per share Profit from continuing operations attributable to ordinary equity holders of the parent entity (control Ordinary number) shares Per share CU CU As reported 10,000,000 2,000,000 5.00 Options – 20,000 10,000,000 2,020,000 4.95 Dilutive 5% convertible bonds 3,000,000 2,000,000 13,000,000 4,020,000 3.23 Dilutive Convertible preference shares 6,400,000 1,600,000 19,400,000 5,620,000 3.45 Antidilutive Because diluted earnings per share is increased when taking the convertible preference shares into account (from CU3.23 to CU3.45), the convertible preference shares are antidilutive and are ignored in the calculation of diluted earnings per share. Therefore, diluted earnings per share for profit from continuing operations is CU3.23: Basic EPS Diluted EPS CU CU Profit from continuing operations attributable to ordinary equity holders of the parent entity 5.00 3.23 Loss from discontinued operations attributable to ordinary equity holders of the parent entity (2.00) ab (0.99) Profit attributable to ordinary equity holders of cdthe parent entity 3.00 2.24 a (CU4,000,000) ? 2,000,000 = (CU2.00) b (CU4,000,000) ? 4,020,000 = (CU0.99) c CU6,000,000 ? 2,000,000 = CU3.00 d (CU6,000,000 + CU3,000,000) ? 4,020,000 = CU2.24 34 ? IASCF IAS 33 IE Example 10 Instruments of a subsidiary: calculation of basic and diluted *earnings per share Reference: IAS 33, paragraphs 40, A11 and A12 Parent: Profit attributable to ordinary equity holders of the CU12,000 (excluding any earnings of, or dividends paid parent entity by, the subsidiary) Ordinary shares outstanding 10,000 Instruments of subsidiary owned by the parent 800 ordinary shares 30 warrants exercisable to purchase ordinary shares of subsidiary 300 convertible preference shares Subsidiary: Profit CU5,400 Ordinary shares outstanding 1,000 Warrants 150, exercisable to purchase ordinary shares of the subsidiary Exercise price CU10 Average market price of one ordinary share CU20 Convertible preference shares 400, each convertible into one ordinary share Dividends on preference shares CU1 per share No inter-company eliminations or adjustments were necessary except for dividends. For the purposes of this illustration, income taxes have been ignored. * This example does not illustrate the classification of the components of convertible financial instruments as liabilities and equity or the classification of related interest and dividends as expenses and equity as required by IAS 32. ? IASCF 35 IAS 33 IE abCU5,400– CU400 Basic EPS CU5.00 calculated: c1,000 dCU5,400 Diluted EPS CU3.66 calculated: ef(1,000 + 75 + 400) a Subsidiary's profit attributable to ordinary equity holders. b Dividends paid by subsidiary on convertible preference shares. c Subsidiary's ordinary shares outstanding. d Subsidiary's profit attributable to ordinary equity holders (CU5,000) increased by CU400 preference dividends for the purpose of calculating diluted earnings per share. e Incremental shares from warrants, calculated: [(CU20 – CU10) ? CU20] × 150. f Subsidiary's ordinary shares assumed outstanding from conversion of convertible preference shares, calculated: 400 convertible preference shares × conversion factor of 1. ab + CU4,300 CU12,000 Basic EPS CU1.63 calculated: c10,000 defCU12,000 + CU2,928 + CU55 + CU1,098 Diluted EPS CU1.61 calculated: 10,000 a Parent's profit attributable to ordinary equity holders of the parent entity. b Portion of subsidiary’s profit to be included in consolidated basic earnings per share, calculated: (800 × CU5.00) + (300 × CU1.00). c Parent’s ordinary shares outstanding. d Parent’s proportionate interest in subsidiary’s earnings attributable to ordinary shares, calculated: (800 ‚ 1,000) × (1,000 shares × CU3.66 per share). e Parent’s proportionate interest in subsidiary’s earnings attributable to warrants, calculated: (30 ‚ 150) × (75 incremental shares × CU3.66 per share). f Parent’s proportionate interest in subsidiary’s earnings attributable to convertible preference shares, calculated: (300 ? 400) × (400 shares from conversion × CU3.66 per share). 36 ? IASCF IAS 33 IE Example 11 Participating equity instruments and two-class ordinary *shares Reference: IAS 33, paragraphs A13 and A14 Profit attributable to equity holders of the parent entity CU100,000 Ordinary shares outstanding 10,000 Non-convertible preference shares 6,000 Non-cumulative annual dividend on preference shares (before any dividend is paid on ordinary shares) CU5.50 per share After ordinary shares have been paid a dividend of CU2.10 per share, the preference shares participate in any additional dividends on a 20:80 ratio with ordinary shares (ie after preference and ordinary shares have been paid dividends of CU5.50 and CU2.10 per share, respectively, preference shares participate in any additional dividends at a rate of one-fourth of the amount paid to ordinary shares on a per-share basis). Dividends on preference shares paid CU33,000 (CU5.50 per share) Dividends on ordinary shares paid CU21,000 (CU2.10 per share) CU CU Profit attributable to equity holders of the parent entity 100,000 Less dividends paid: Preference 33,000 Ordinary 21,000 (54,000) Undistributed earnings 46,000 Allocation per ordinary share = A Allocation per preference share = B; B = 1/ A 4 1 (A × 10,000) + (/ × A × 6,000) = CU46,000 4 A = CU46,000 ? (10,000 + 1,500) A = CU4.00 * This example does not illustrate the classification of the components of convertible financial instruments as liabilities and equity or the classification of related interest and dividends as expenses and equity as required by IAS 32. ? IASCF 37 IAS 33 IE 1 B = / A 4 B = CU1.00 Preference Ordinary shares shares Distributed earnings CU5.50 CU2.10 Undistributed earnings CU1.00 CU4.00 Totals CU6.50 CU6.10 Example 12 Calculation and presentation of basic and diluted earnings *per share (comprehensive example) This example illustrates the quarterly and annual calculations of basic and diluted earnings per share in the year 20X1 for Company A, which has a complex capital structure. The control number is profit or loss from continuing operations attributable to the parent entity. Other facts assumed are as follows: Average market price of ordinary shares: The average market prices of ordinary shares for the calendar year 20X1 were as follows: First quarter CU49 Second quarter CU60 Third quarter CU67 Fourth quarter CU67 The average market price of ordinary shares from 1 July to 1 September 20X1 was CU65. Ordinary shares: The number of ordinary shares outstanding at the beginning of 20X1 was 5,000,000. On 1 March 20X1, 200,000 ordinary shares were issued for cash. Convertible bonds: In the last quarter of 20X0, 5 per cent convertible bonds with a principal amount of CU12,000,000 due in 20 years were sold for cash at CU1,000 (par). Interest is payable twice a year, on 1 November and 1 May. Each CU1,000 bond is convertible into 40 ordinary shares. No bonds were converted in 20X0. The entire issue was converted on 1 April 20X1 because the issue was called by Company A. Convertible preference shares: In the second quarter of 20X0, 800,000 convertible preference shares were issued for assets in a purchase transaction. The quarterly dividend on each convertible preference share is CU0.05, payable at the end of the quarter for shares outstanding at that date. Each share is convertible into one ordinary share. Holders of 600,000 convertible preference shares converted their preference shares into ordinary shares on 1 June 20X1. Warrants: Warrants to buy 600,000 ordinary shares at CU55 per share for a period of five years were issued on 1 January 20X1. All outstanding warrants were exercised on 1 September 20X1. Options: Options to buy 1,500,000 ordinary shares at CU75 per share for a period of 10 years were issued on 1 July 20X1. No options were exercised during 20X1 because the exercise price of the options exceeded the market price of the ordinary shares. Tax rate: The tax rate was 40 per cent for 20X1. * This example does not illustrate the classification of the components of convertible financial instruments as liabilities and equity or the classification of related interest and dividends as expenses and equity as required by IAS 32. 38 ? IASCF IAS 33 IE a20X1 Profit (loss) from continuing operations Profit (loss) attributable attributable to to the parent the parent entity entity CU CU First quarter 5,000,000 5,000,000 Second quarter 6,500,000 6,500,000 Third quarter 1,000,000 (1,000,000) b Fourth quarter (700,000) (700,000) Full year 11,800,000 9,800,000 a This is the control number (before adjusting for preference dividends). b Company A had a CU2,000,000 loss (net of tax) from discontinued operations in the third quarter. First Quarter 20X1 Basic EPS calculation CU Profit from continuing operations attributable to the parent entity 5,000,000 Less: preference shares dividends (40,000) ab Profit attributable to ordinary equity holders of the parent entity 4,960,000 Dates Weighted- Shares Fraction of average outstanding period shares 1 January–28 February 5,000,000 2/ 3,333,333 3 Issue of ordinary shares on 1 March 200,000 11 March–31 March 5,200,000 / 1,733,333 3 Weighted-average shares 5,066,666 Basic EPS CU0.98 ? IASCF 39 IAS 33 IE Diluted EPS calculation Profit attributable to ordinary equity holders of the parent entity CU4,960,000 Plus: profit impact of assumed conversions Preference share dividends CU40,000 ab c Interest on 5% convertible bonds CU90,000 Effect of assumed conversions CU130,000 Profit attributable to ordinary equity holders of the parent entity including assumed conversions CU5,090,000 Weighted-average shares 5,066,666 Plus: incremental shares from assumed conversions Warrants 0 d Convertible preference shares 800,000 5% convertible bonds 480,000 Dilutive potential ordinary shares 1,280,000 Adjusted weighted-average shares 6,346,666 Diluted EPS CU0.80 a 800,000 shares × CU0.05 b 800,000 shares × CU0.05 c (CU12,000,000 × 5%) ? 4; less taxes at 40% d The warrants were not assumed to be exercised because they were antidilutive in the period (CU55 [exercise price] > CU49 [average price]). 40 ? IASCF IAS 33 IE Second Quarter 20X1 Basic EPS calculation CU Profit from continuing operations attributable to the parent entity 6,500,000 Less: preference shares dividends (10,000) ab Profit attributable to ordinary equity holders of the parent entity 6,490,000 Dates Weighted- Shares Fraction of average outstanding period shares 1 April 5,200,000 Conversion of 5% bonds on 1 April 480,000 1 April–31 May 5,680,000 2/ 3,786,666 3 Conversion of preference shares 1 June 600,000 11 June–30 June 6,280,000 / 2,093,333 3 Weighted-average shares 5,880,000 Basic EPS CU1.10 Diluted EPS calculation Profit attributable to ordinary equity holders of the parent entity CU6,490,000 Plus: profit impact of assumed conversions Preference share dividends CU10,000 ab Effect of assumed conversions CU10,000 Profit attributable to ordinary equity holders of the parent entity including assumed conversions CU6,500,000 Weighted-average shares 5,880,000 ? IASCF 41 IAS 33 IE Plus: incremental shares from assumed conversions c Warrants 50,000 d Convertible preference shares 600,000 Dilutive potential ordinary shares 650,000 Adjusted weighted-average shares 6,530,000 Diluted EPS CU1.00 a 200,000 shares × CU0.05 b 200,000 shares × CU0.05 c CU55 × 600,000 = CU33,000,000; CU33,000,000 ? CU60 = 550,000; 600,000 – 550,000 = 50,000 shares OR [(CU60 – CU55) ? CU60] × 600,000 shares = 50,000 shares d (800,000 shares × 21/) + (200,000 shares × /) 33 42 ? IASCF IAS 33 IE Third Quarter 20X1 Basic EPS calculation CU Profit from continuing operations attributable to the parent entity 1,000,000 Less: preference shares dividends (10,000) Profit from continuing operations attributable to ordinary equity holders of the parent entity 990,000 Loss from discontinued operations attributable to the parent entity (2,000,000) Loss attributable to ordinary equity holders of the parent entity (1,010,000) Dates Shares Fraction of Weighted-average outstanding period shares 1 July–31 August 6,280,000 2/ 4,186,666 3 Exercise of warrants on 1 September 600,000 11 September–30 September 6,880,000 / 2,293,333 3 Weighted-average shares 6,480,000 Basic EPS Profit from continuing operations CU0.15 Loss from discontinued operations (CU0.31) Loss (CU0.16) Diluted EPS calculation Profit from continuing operations attributable to ordinary equity holders of the parent entity CU990,000 Plus: profit impact of assumed conversions Preference share dividends CU10,000 Effect of assumed conversions CU10,000 ? IASCF 43 IAS 33 IE Profit from continuing operations attributable to ordinary equity holders of the parent entity including assumed conversions CU1,000,000 Loss from discontinued operations attributable to the parent entity (CU2,000,000) Loss attributable to ordinary equity holders of the parent entity including assumed conversions (CU1,000,000) Weighted-average shares 6,480,000 Plus: incremental shares from assumed conversions Warrants 61,538 a Convertible preference shares 200,000 Dilutive potential ordinary shares 261,538 Adjusted weighted-average shares 6,741,538 Diluted EPS Profit from continuing operations CU0.15 Loss from discontinued operations (CU0.30) Loss (CU0.15) 2a [(CU65 ? CU55) ‚ CU65] × 600,000 = 92,308 shares; 92,308 × / = 61,538 shares 3 Note: The incremental shares from assumed conversions are included in calculating the diluted per-share amounts for the loss from discontinued operations and loss even though they are antidilutive. This is because the control number (profit from continuing operations attributable to ordinary equity holders of the parent entity, adjusted for preference dividends) was positive (ie profit, rather than loss). 44 ? IASCF IAS 33 IE Fourth Quarter 20X1 Basic EPS calculation CU Loss from continuing operations attributable to the parent entity (700,000) Add: preference shares dividends (10,000) Loss attributable to ordinary equity holders of the parent entity (710,000) Dates Weighted- Shares Fraction of average outstanding period shares 1 October–31 December 6,880,000 3/ 6,880,000 3 Weighted-average shares 6,880,000 Basic and diluted EPS Loss attributable to ordinary equity holders of the parent entity (CU0.10) Note: The incremental shares from assumed conversions are not included in calculating the diluted per-share amounts because the control number (loss from continuing operations attributable to ordinary equity holders of the parent entity adjusted for preference dividends) was negative (ie a loss, rather than profit). Full Year 20X1 Basic EPS calculation CU Profit from continuing operations attributable to the parent entity 11,800,000 Less: preference shares dividends (70,000) Profit from continuing operations attributable to ordinary equity holders of the parent entity 11,730,000 Loss from discontinued operations attributable to the parent entity (2,000,000) Profit attributable to ordinary equity holders of the parent entity 9,730,000 Dates Fraction of Weighted-average Shares outstanding period shares 1 January–28 February 5,000,000 2/ 833,333 12 ? IASCF 45 IAS 33 IE Issue of ordinary shares on 1 March 200,000 11 March–31 March 5,200,000 / 433,333 12 Conversion of 5% bonds on 1 April 480,000 21 April–31 May 5,680,000 / 946,667 12 Conversion of preference shares on 1 June 600,000 31 June–31 August 6,280,000 / 1,570,000 12 Exercise of warrants on 1 September 600,000 41 September–31 December 6,880,000 / 2,293,333 12 Weighted-average shares 6,076,667 Basic EPS Profit from continuing operations CU1.93 Loss from discontinued operations (CU0.33) Profit CU1.60 Diluted EPS calculation Profit from continuing operations attributable to ordinary equity holders of the parent entity CU11,730,000 Plus: profit impact of assumed conversions Preference share dividends CU70,000 Interest on 5% convertible bonds CU90,000 a Effect of assumed conversions CU160,000 Profit from continuing operations attributable to ordinary equity holders of the parent entity including assumed conversions CU11,890,000 Loss from discontinued operations attributable to the parent entity (CU2,000,000) Profit attributable to ordinary equity holders of the parent entity including assumed conversions CU9,890,000 Weighted-average shares 6,076,667 46 ? IASCF IAS 33 IE Plus: incremental shares from assumed conversions b Warrants 14,880 c Convertible preference shares 450,000 d 5% convertible bonds 120,000 Dilutive potential ordinary shares 584,880 Adjusted weighted-average shares 6,661,547 Diluted EPS Profit from continuing operations CU1.78 Loss from discontinued operations (CU0.30) Profit CU1.48 a (CU12,000,000 × 5%) ? 4; less taxes at 40% *8*b [(CU57.125 – CU55) ? CU57.125] × 600,000 = 22,320 shares; 22,320 × / = 14,880 sharesThe average market price from 1 January 20X1 12to 1 September 20X1 57c (800,000 shares × /) + (200,000 shares × /) 12123d 480,000 shares × / 12 The following illustrates how Company A might present its earnings per share data in its statement of comprehensive income. Note that the amounts per share for the loss from discontinued operations are not required to be presented in the statement of comprehensive income. For the year ended 20X1 CU Earnings per ordinary share Profit from continuing operations 1.93 Loss from discontinued operations (0.33) Profit 1.60 Diluted earnings per ordinary share Profit from continuing operations 1.78 ? IASCF 47 IAS 33 IE Loss from discontinued operations (0.30) Profit 1.48 The following table includes the quarterly and annual earnings per share data for Company A. The purpose of this table is to illustrate that the sum of the four quarters’ earnings per share data will not necessarily equal the annual earnings per share data. The Standard does not require disclosure of this information. First Second Third Fourth quarter quarter quarter quarter Full year CU CU CU CU CU Basic EPS Profit (loss) from continuing operations 0.98 1.10 0.15 (0.10) 1.93 Loss from discontinued operations – – (0.31) – (0.33) Profit (loss) 0.98 1.10 (0.16) (0.10) 1.60 Diluted EPS Profit (loss) from continuing operations 0.80 1.00 0.15 (0.10) 1.78 Loss from discontinued operations – – (0.30) – (0.30) Profit (loss) 0.80 1.00 (0.15) (0.10) 1.48 48 ? IASCF ? IASCF 49