profit or loss attributable to ordinary equity holders. The disclosure of the terms and
conditions of such financial instruments and other contracts is encouraged by IAS 33, if
not otherwise required by IFRS 7 – Financial Instruments: Disclosures (discussed in
Chapter 50). [IAS 33.72].
8 APPENDIX
Reproduced below is the comprehensive worked example in IAS 33 of the
computation and presentation of EPS. [IAS 33.IE12]. It illustrates four quarters and then
the full year, but the principles and calculations would be the same whatever the
length of the periods considered.
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 CU
49
Second quarter CU
60
Third quarter CU
67
Fourth quarter CU
67
The average market price of ordinary shares from 1 July to 1 September 20X1 was CU 65.
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
CU 12,000,000 due in 20 years were sold for cash at CU 1,000 (par). Interest is payable twice a year, on
1 November and 1 May. Each CU 1,000 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
CU 0.05, 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 CU 55 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 CU 75 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.
Earnings per share 2935
Profit (loss) from continuing
Profit (loss)
operations attributable
attributable to the
20X1
to the parent entity (a)
parent 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 CU 2,000,000 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)
(c)
Profit attributable to ordinary equity holders of the parent entity
4,960,000
Weighted-
Shares
Fraction
average
Dates
Outstanding
of period
shares
1 January 28 February
5,000,000
2/3
3,333,333
Issue of ordinary shares on 1 March
200,000
1 March 31 March
5,200,000
1/3
1,733,333
Weighted-average shares
5,066,666
Basic EPS
CU 0.98
(c) 800,000 shares × CU 0.05
Diluted EPS calculation
Profit attributable to ordinary equity holders of the parent entity
CU 4,960,000
Plus: profit impact of assumed conversions
Preference share dividends
CU 40,000
(d)
Interest on 5% convertible bonds
CU 90,000
(e)
Effect of assumed conversions
CU 130,000
Profit attributable to ordinary equity holders of the
parent entity including assumed conversions
CU 5,090,000
Weighted-average shares
5,066,666
Plus: incremental shares from assumed conversions
Warrants 0
(f)
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
CU 0.80
(d) 800,000 shares × CU 0.05
(e) (CU 12,000,000 × 5%) ÷ 4; less taxes at 40%
(f) The warrants were not assumed to be exercised because they were antidilutive in the period (CU 55
[exercise price] > CU 49 [average price]).
2936 Chapter 33
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)
(g)
Profit attributable to ordinary equity holders of the parent entity
6,490,000
Shares
Fraction
Weighted-
Dates
outstanding
of period
average shares
1 April
5,200,000
Conversion of 5% bonds on 1April
480,000
1 April-31 May
5,680,000
2/3
3,786,666
Conversion of preference shares on 1June
600,000
1 June-30 June
6,280,000
1/3
2,093,333
Weighted-average shares
5,880,000
Basic EPS
CU 1.10
(g) 200,000 shares × CU 0.05
Diluted EPS calculation
Profit attributable to ordinary equity holders of the parent entity
CU
6,490,000
Plus: profit impact of assumed conversions
Preference share dividends
CU 10,000
(h)
Effect of assumed conversions
CU 10,000
&
nbsp; Profit attributable to ordinary equity holders of the parent entity
including assumed conversions
CU 6,500,000
Weighted-average shares
5,880,000
Plus: incremental shares from assumed conversions
Warrants 50,000
(i)
Convertible preference shares
600,000
(j)
Dilutive potential ordinary shares
650,000
Adjusted weighted-average shares
6,530,000
Diluted EPS
CU 1.00
(h) 200,000 shares × CU 0.05
(i) CU 55 × 600,000 = CU 33,000,000; CU 33,000,000 ÷ CU 60 = 550,000;
600,000 – 550,000 = 50,000 shares or
[(CU 60 – CU 55) ÷ CU 60] × 600,000 shares = 50,000 shares
(j) (800,000 shares × 2/3) + (200,000 shares × 1/3)
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)
Earnings per share 2937
Shares
Fraction
Weighted-
Dates
outstanding
of period
average shares
1 July-31 August
6,280,000
2/3 4,186,666
Exercise of warrants on 1 September
600,000
1 September-30 September 6,880,000
1/3
2,293,333
Weighted-average shares
6,480,000
Basic EPS
Profit from continuing operations
CU 0.15
Loss from discontinued operations
(CU 0.31)
Loss
(CU 0.16)
Diluted EPS calculation
Profit from continuing operations attributable to ordinary
equity holders of the parent entity
CU
990,000
Plus: profit impact of assumed conversions
Preference shares dividends
CU 10,000
Effect of assumed conversions
CU
10,000
Profit from continuing operations attributable to ordinary equity
holders of the parent entity including assumed conversions
CU 1,000,000
Loss from discontinued operations attributable to the
parent entity
(CU 2,000,000)
Loss attributable to ordinary equity holders of the parent
entity including assumed conversions
(CU 1,000,000)
Weighted-average shares
6,480,000
Plus: incremental shares from assumed conversions
Warrants 61,538
(k)
Convertible preference shares
200,000
Dilutive potential ordinary shares
261,538
Adjusted weighted-average shares
6,741,538
Diluted EPS
Profit from continuing operations
CU
0.15
Loss from discontinued operations
(CU
0.30)
Loss
(CU
0.15)
(k)
[(CU 65 – CU 55) ÷ CU 65] × 600,000 = 92,308 shares; 92,308 × 2/3 = 61,538 shares
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 (i.e. profit, rather than loss).
Fourth Quarter 20X1
Basic and diluted 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)
2938 Chapter 33
Shares
Fraction
Weighted-
Dates
outstanding
of period
average shares
1October-31 December 6,880,000
3/3
6,880,000
Weighted-average shares
6,880,000
Basic and diluted EPS
Loss attributable to ordinary equity holders of the parent entity
(CU 0.10)
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 (i.e. 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
Shares
Fraction
Weighted-
Dates
Outstanding
of period
average shares
1 January-28 February
5,000,000
2/12
833,333
Issue of ordinary shares on 1March
200,000
1 March-31 March
5,200,000
1/12
433,333
Conversion of 5% bonds on 1April
480,000
1 April-31 May
5,680,000
2/12
946,667
Conversion of preference shares on 1June
600,000
1 June-31 August
6,280,000
3/12 1,570,000
Exercise of warrants on 1September
600,000
1 September-31 December 6,880,000
4/12
2,293,333
Weighted-average shares
6,076,667
Basic EPS
Profit from continuing operations
CU 1.93
Loss from discontinued operations
(CU 0.33)
Profit
CU 1.60
Diluted EPS calculation
Profit from continuing operations attributable
to ordinary equity holders of the parent entity
CU
11,730,000
Plus: profit impact of assumed conversions
Preference share dividends
CU 70,000
Interest on 5% convertible bonds
CU 90,000
(l)
Effect of assumed conversions
CU
160,000
Earnings per share 2939
Profit from continuing opera
tions attributable to
ordinary equity holders of the parent entity including
assumed conversions
CU 11,890,000
Loss from discontinued operations attributable to the
parent entity
International GAAP® 2019: Generally Accepted Accounting Practice under International Financial Reporting Standards Page 584
