Deegan5e Sm Ch27

Chapter 27 Earnings per share 27.1 (a)

Basic EPS is determined by dividing the earnings of the entity for the reporting period by the weighted-average number of shares of the entity. Paragraph 10 of AASB 133 states: 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. Earnings are determined after deducting any preference share dividends appropriated for the financial year to the extent they have not been treated as expenses of the entity. Preference share dividends are deducted to provide ‘earnings’ on the basis that the EPS is calculated from the perspective of ordinary shareholders. In considering subtracting preference dividends for the purpose of calculating EPS, it is necessary to determine, in those periods where the preference dividend is not paid, whether the preference shares are cumulative or not. The characteristic of a cumulative dividend preference share is that where dividends are not paid in a particular year, they must be paid in later years before ordinary shareholders are entitled to receive any dividends out of profits. If the preference dividend is not cumulative, and no amount has been appropriated for the year, then it may be ignored for the purpose of the EPS calculation. AASB 133 also requires that earnings must be calculated to exclude the following items:  Any portion attributable to outside equity interests; and  Any costs of servicing equity, paid or provided for, other than dividends on ordinary shares and partly-paid shares. As indicated above, in determining the number of shares we use a weighted average. Specifically, paragraph 19 of AASB 133 states: 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. In determining the ‘weighted average number of shares’, AASB 133 indicates that the number is determined as the total of the number of ordinary shares of the entity outstanding as at the reporting period adjusted as follows:

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(i)

increased by ordinary shares issued during the reporting period; and,

(ii)

decreased by reductions in the number of ordinary shares during the reporting period, including by way of share buy-backs.

where (i) and (ii) are weighted by reference to the number of days from, respectively, the date of issue of those shares, or the date of reduction, to the reporting date as a proportion of the total number of days in the reporting period. The weighted average number of shares also has to take into account ‘mandatorily convertible securities’—that is, securities that must ultimately be converted to ordinary shares. As paragraph 23 of AASB 133 states: 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. The weighted average number of ordinary shares also needs to take into account partly paid ordinary shares unless the partly paid ordinary shares carry no rights to participate in earnings. (b)

Diluted EPS is calculated and disclosed where an entity has on issue potential ordinary shares that are dilutive. To determine diluted EPS, the weighted average number of shares will be determined in accordance with the calculations provided for basic EPS, with the inclusion of an additional factor based upon the weighted average number of potential ordinary shares that the company may have had on issue throughout all, or part, of the financial year. A potential ordinary share is broadly defined at AASB 133 as a financial instrument or other contract that may entitle its holder to ordinary shares. AASB 133 requires that in determining the weighted average number of shares for diluted EPS we start with the number used to calculate basic EPS and then make adjustments to this number. Paragraph 36 states: 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. Specifically, we add the following (to the extent they are dilutive) to the weighted average number of shares used to calculate basic EPS:  

The weighted average number of shares deemed to be issued for no consideration; The weighted average number of shares that are contingently issued;

The dilutive potential ordinary shares are weighted by the number of days they were outstanding. Dilutive potential ordinary shares that have

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been issued since the beginning of the reporting period and remain outstanding at reporting date are weighted by reference to the number of days from their date of issue to the reporting date. There is a general rule that if a potential ordinary share issue would increase EPS, it is not considered to be dilutive and would be excluded from the calculation of diluted EPS. As paragraph 41 of AASB 133 states: 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. Each type of potential ordinary shares (for example, convertible preference shares, convertible notes and share options) must be considered separately. Consideration must also be given to the probability of conversion. If the conversion is at the option of the entity, and the conversion is probable, then the potential ordinary shares must be included in the diluted EPS calculation, even if their inclusion does not dilute EPS. In calculating earnings for diluted EPS we have to consider the effects on earnings that would have occurred if those potential ordinary shares that are dilutive were converted to ordinary shares. We work out revised earnings as if the conversion of the potential ordinary shares had actually occurred. Paragraph 33 of AASB 133 states: 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: (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. (i) dividends, interest or other financing costs associated with dilutive potential ordinary shares that have been recognised as expenses during the reporting period; and (ii) any other non-discretionary changes in revenues or expenses for the reporting period that would result from the conversion of the dilutive potential ordinary shares. 27.2

Potential ordinary shares are dilutive if the EPS is recalculated on the basis that the securities were converted to ordinary shares, and the recalculated diluted EPS figure is less than the basic EPS (which is based on the ordinary shares on issue). Potential ordinary shares would emanate from such instruments as share options, convertible debentures and convertible preference shares.

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27.3

As paragraph 27 of AASB 133 explains: 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). Paragraph 28 further explains: 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. The adjustment factor is provided on page 855 of the text.

27.4

Diluted EPS must be shown where an entity has on issue potential ordinary shares that are dilutive. Paragraph 66 of AASB 133 states: An entity shall present on the face of the income statement 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. Paragraph 67 further states: Earnings per share is presented for every period for which an income statement 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 on the income statement. It is possible for earnings to be negative in a particular period. In this regard, paragraph 69 states: An entity shall present basic and diluted earnings per share, even if the amounts are negative (i.e. a loss per share).

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27.5

Yes, if there is a bonus issue we do need to adjust the previous period’s EPS. The adjustment factor is provided on page 855 of the textbook.

27.6

It should be noted that given that the preference dividends are cumulative, it does not matter whether or not they have been paid. If they were non-cumulative, the right to the preference dividend would be lost if they had not been declared, and, hence, for non-cumulative preference shares, the dividend will only be deducted from earnings if the dividend has been appropriated. Hence, earnings would be calculated as: After-tax net profit Less: Preference share dividends Earnings for basic EPS

$1 200 000 (50 000) $1 150 000

Determination of the weighted average number of ordinary shares Portion of year

Period Fully paid ordinary shares 1/7/09–31/10/09 1/11/09–28/2/10 1/3/10–30/6/10 Partly-paid ordinary shares 1/6/10–30/6/10

No. outstanding

Weighted average no. of shares

123/365 120/365 122/365

400 000 480 000 430 000

134 795 157 808 143 726

30/365

100 000($1.00/$2.00)

4 110

Total weighted average number of ordinary shares

440 439

Basic earnings per share, therefore, is $1 150 000 ÷ 440 439 = $2.6110 27.7

Earnings calculation Net profit after tax Less: Preference share dividends Net profit after-tax less preference dividends Theoretical ex bonus price

=

($3.00)(5) + 0 5+1

$1 000 000 (6 000) $ 994 000 =

2.50

Adjustment factor = 2.50 ÷ 3.00 = 0.8333

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Calculation of the weighted average number of ordinary shares and ordinary share equivalents Portion of year

Period Fully-paid ordinary shares 1/7/08–30/9/08 1/10/08–30/4/09 1/5/09–30/6/09

No. outstanding

Adjustment factor

600 000 750 000 900 000

0.8333 0.8333

92/365 212/365 61/365

Weighted average no. of shares 181 487 522 761 150 411 854 659

Basic earnings per share for 2009 would be: $994 000 ÷ 854 659 = $1.1630 The comparative figures for 2008 would be adjusted for the bonus issue. The adjusted figure would be: $2.30 × 0.8333 = $1.9166. Note that when determining the weighted average number of shares for the current financial year, the number of shares outstanding prior to the bonus issue is divided by the adjustment factor. Failure to adjust previous period’s earnings would provide misleading figures as it would appear that the company was not performing as well, when in fact the reduction in EPS may be due to the bonus issue. 27.8

Weighted average ordinary shares

Fully-paid ordinary shares 365 365 30* 365

×

100 000 000

×

0.50 2.00

Earnings $

Basic EPS $

100 000 000 ×

15 000 000

308 219 100 308 219 $410 000 000 $4.09

*

1 July 2008–31 May 2009 is 335 days 1 June 2009–30 June 2009 is 30 days Note: It is assumed that that holders of the partly-paid shares are entitled to dividends in proportion to the paid-up amount of the shares.

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27.9

365 365 181 365 61 365

Weighted average of outstanding ordinary shares 3 200 000

× 2 400 000/0.75* ×

600 000/0.75*

396 712

×

1 000 000

167 123 3 763 835

Earnings $

600 000**

EPS $

$0.1594

* Calculation of adjustment factor Adjustment factor = where: Px = theoretical ex rights price =

Px Po (Po × No) + Pr No + 1

Where Po = last sale price or, if higher, the last bid price cum rights No = the number of ordinary shares required for one right Pr = the subscription price of the right (or the present value of the subscription price payable in instalments) plus the present value of dividends forgone in respect of ordinary shares required for one right not presently participating in dividends Px = Px = Px Po

(1.50 × 3) + 0 4 1.125 =

1.125 1.50

= theoretical ex-rights price = $0.75

** Earnings Profit after tax Less outside equity interests Less preference dividends

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$ 800 000 (100 000) (100 000) $ 600 000

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27.10

Earnings Basic $ (290 000 – 20 000) Conversion of preference shares 1 000 000 × ½ Saved preference dividend

Shares

$270 000

2 000 000 500 000

20 000 $290 000

Diluted earnings per share

= =

2 500 000 $290 000 2 500 000 $0.116

27.11 Paragraph 66 of AASB 133 states: An entity shall present on the face of the income statement 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. Paragraph 67 further states: Earnings per share is presented for every period for which an income statement 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 on the income statement. AASB 133 also requires that basic EPS must be presented even if the amounts are negative (a loss per share). It is commonly accepted that earnings will affect share prices. By dividing earnings by the number of shares, and by making assumptions about the lags between earnings and cash flows, EPS data may provide useful information to the marketplace in determining the appropriate market price of the firm’s equity securities. Apart from the shares on issue at reporting date, companies may also have issued certain securities which may potentially be converted into ordinary shares. For example, the company may have issued convertible preference shares, convertible notes, convertible debentures, or share options all of which may potentially be converted into ordinary shares. The requirement to present diluted EPS will show how EPS would have been affected if the securities in existence at reporting date had actually been converted to ordinary shares. This helps to inform investors of how the EPS could conceivably be affected in future. 27.12

365 days 365 days

× 9 750 000*

=

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9 750 000

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51 days 365 days

× $2.00** × 3 250 000 $2.30

=

394 878 10 144 878

EPS

= =

*

$3 750 000*** 10 144 878 $0.3696

weighted average outstanding ordinary shares.

** the number of ordinary share equivalents is to be based on a weighted average determined by reference to the number of days during the financial year that the relevant partly-paid ordinary shares carried those rights to participate in dividends as a proportion of the number of days in the financial year. ***

profit after tax.

27.13 The profit after tax earnings for each 6-month period is calculated using the first two columns given in the question, as follows: 12 Months to 30/6/09 17 500 000 5 500 000 12 000 000

Profit Income tax expense Profit after tax

6 Months to 31/12/08 7 035 800 1 756 000 5 279 800

6 Months to 30/6/09 10 464 200 3 744 000 6 720 200

Basic EPS 365 days 365 days

×

5 000 000

=

EPS

=

$12 000 000/5 000 000

5 000 000 =

$2.40

Diluted EPS Options As the options had not been on issue for the entire year, we must weight them for the time they were outstanding. The Standard requires that we consider the number of shares that would effectively be issued for no consideration if these options are exercised. To determine this we make the following calculation: Options issued on 15 September 2008 Number of shares issuable: Number of shares that would be issued at market price for the actual proceeds of $25 000 000 = $25 000 000 ÷ $2.20 Solutions Manual t/a Australian Financial Accounting 5/e by Craig Deegan

10 000 000 11 363 636 27–9

Number of shares deemed issued for no consideration

(1 363 636)

As the above calculation is negative, meaning no shares would be issued for no consideration given the current market price, and as the exercise of the options is not mandatory, then the above option issue is not dilutive and can be ignored for the purposes of calculating diluted EPS. Options issued on 25 March 2009 Number of shares issuable: Number of shares that would be issued at market price for the actual proceeds of $2 000 000 = $2 000 000 ÷ $2.20 Number of shares deemed issued for no consideration

1 000 000 909 091 90 909

As these options were not in place at the beginning of the year, they will be weighted for the number of days they have been on issue: 90 909 × 107/365 = 26 650 Calculation of diluted EPS $12 000 000 5 000 000 + 26 650

=

$12 000 000 5 026 650

=

$2.3873

27.14 Calculation of basic earnings per share Weighted average number of ordinary shares Fully-paid ordinaries: 365/365 × 90 000 000 = Partly-paid ordinaries: 365/365 × 1.00/2.00 × 10 000 000 ** = Dividend reinvestment: 91/365 × 1 000 000 * = Partly-paid call: 122/365 × 0.50/2.00 × 10 000 000 **

$ Earnings

Basic EPS

90 000 000 5 000 000 249 315 835 616 96 084 931

$23 000 000

$0.2394c



The effective date to commence weighting is after 31 March 2010—i.e. 1 April 2010. At this point the dividend became payable.

**

Partly-paid shares should be included in Basic EPS by calculating the fully-paid equivalent number of shares. When a call is made in the period, the time weighting should commence from the date the call is due and payable. In this case the closing date is 28 February 2010.

Calculation of diluted EPS We need to consider those securities which are potential ordinary shares. The options and partlypaid shares are potentially dilutive. Each security must be considered separately. For both options and partly-paid shares, there will be an inflow of funds into the organisation when the option is

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exercised, or the call is paid. For the options, the Accounting Standard assumes that there will only be an inflow of funds if the exercise price is less than the market price. The weighted average number of shares used to calculate diluted EPS is adjusted for options and partly-paid ordinary shares by adjusting for the number of ordinary shares that are assumed to be issued for no consideration (this can be contrasted to convertible instruments, such as convertible notes or convertible preference shares, where the adjustment takes into account the maximum number of ordinary shares to be issued as well as an adjustment to earnings). Calculate earnings per incremental share Partly-paid shares There is no adjustment to earnings for the capital inflow associated with the partly-paid shares. Their conversion is deemed to be mandatory, hence they would be ranked last if we apply the ‘trigger test’. To determine the number of shares deemed issued for no consideration, we must acknowledge that at least $0.50 was outstanding on the partly-paid shares for the entire year, with $1.00 being outstanding until 28 February. To account for period to call date of 28 February: Number of shares issuable: 10m × ($1.00  $2.00) = 5m Number of shares that would be issued at market price for the actual proceeds of $10: ($10m  $2.50) = 4m Number deemed issued for no consideration 1m × (243  365) To account for period from call date of 28 February: Number of shares issuable: 10m × ($0.50  $2.00) = 2.5m Number of shares that would be issued at market price for the actual proceeds of $10: ($5m  $2.50) = 2m Number deemed issued for no consideration 0.5m × (122  365)

665 753

167 123 832 876

Share options issued on 1 January 2008 As they were on issue at the beginning of the year, they are potentially dilutive for the entire year. We need to consider the number of shares that would effectively be issued for no consideration if these options were exercised (if shares were effectively issued for no consideration then that would encourage the options holders to exercise the option; there would be no incentive to exercise the option if they were not effectively getting something for ‘free’). Number of shares issuable 10 000 000 Number of shares that would be issued at market price 10 400 000 for the actual proceeds of $26m = $26 m  $2.5 Number deemed issued for no consideration (400 000) We can see that no shares would effectively be issued for ‘no consideration’ as the above number is negative. As the price to be paid for the shares (the exercise price) is greater than the market price of the shares, they would not be deemed to be ‘shares issued for no consideration’, and hence can be ignored for the purposes of calculating diluted EPS. They are ignored because as the market price is less than the exercise price, it is not likely that the options would be exercised under the current market conditions.

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Share options issued on 30 June 2008 As they were on issue at the beginning of the year, they are potentially dilutive for the entire year. Number of share issuable @ $2.10 10 000 000 Number of shares that would be issued at market price 8 400 000 for the actual proceeds of $21m = $21 m  $2.5 Number of shares deemed issued for no consideration 1 600 000 As the number of shares would increase, but notional earnings is not adjusted, the above issue is deemed to be dilutive. In determining diluted EPS, we will ignore any potential ordinary shares that are not dilutive. In this case, the share option issue made on 1 January 2008 is ignored. As the option issue on 30 June 2008 increases potential ordinary shares without increasing earnings, and as the partly-paid shares also increase the number of shares without increasing earnings, then the ‘trigger test’ would be deemed to be met. Profit As reported for basic EPS

Ordinary shares

$23 000 000

96 084 931

Options

Nil

1 600 000

Partly-paid shares

Nil

832 876

$23 000 000

98 517 807

Diluted EPS = $23 000 000 ÷ 98 517 807 = $0.2335. Again, as the option issue made on 1 January 2008 is not dilutive, it is not included in the calculation of diluted EPS. However, had its conversion been mandatory, it would be included even though the effect is anti-dilutive.

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27.15 Calculation of basic earnings per share

1 July 2010

Fully-paid ordinary shares 75 000 000 ×

1 May 2011

100 000 000 ×

304 365 61 365

Basic earnings per share



0.8514*

16 712 329 90 080 609 =

$70 000 000 90 080 609 $0.777

= * Theoretical ex-rights price

=

((2.50 – 0.035) × 3) + 1 3+1

Adjustment factor

=

2.09875 2.465 0.8514

=

73 368 280

= 2.09875

Calculation of diluted EPS We need to consider those securities which are potential ordinary shares. The convertible notes and options are potentially dilutive. Each security must be considered separately. Share options As the options have been on issue for the entire year, we treat them as potentially dilutive as of the beginning of the year. The Standard requires that we consider the number of shares that would effectively be issued for no consideration if these options are exercised. To determine this we make the following calculation: Number of shares issuable (exercise price $2): Number of shares that would be issued at market price for the actual proceeds of $20 000 000 = $20 000 000 ÷ $2.50 Number of shares deemed issued for no consideration

10 000 000 8 000 000 2 000 000

Given that the Standard requires that there is no adjustment to earnings in relation to the options, the earnings per incremental share is $nil. 2 000 000 shares will be added to the denominator to calculate diluted EPS. Convertible notes If the notes were converted to ordinary shares, the pre-tax earnings would be increased by $500 000 (the interest expense which would no longer be payable which is equal to 2 000 000 × $2.50 × 10%). This would lead to an after-tax increase in earnings of $300 000, which is $500 000 × (1 – 0.40). As an additional 2 000 000 shares would be created, the increase in earnings attributable to ordinary shareholders on conversion of the convertible debentures would, on an incremental share basis, be: $300 000 ÷ 2 000 000 = $0.15 Solutions Manual t/a Australian Financial Accounting 5/e by Craig Deegan

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We must now rank the above potential ordinary shares in order from greatest to least dilution AASB 133 requires that when we consider whether potential ordinary shares are dilutive, each issue or series of potential ordinary shares must be considered separately, rather than in aggregate. Each issue or series of potential ordinary shares must be considered in sequence from the most dilutive (smallest earnings per incremental share) to the least dilutive (largest earning per incremental share). In this question, the order from most dilutive to least dilutive is:

Options Convertible notes

Increase in shares 2 000 000 2 000 000

Earnings per incremental share $nil $0.15

We must now determine the ‘trigger test’ AASB 133 includes a ‘trigger test’ to determine whether potential ordinary shares are dilutive. If the shares cause EPS to decrease from the initial amount determined for the trigger test, then they are considered dilutive. The Standard uses net profit or loss from continuing ordinary operations as the initial amount for the trigger test to determine whether potential ordinary shares are dilutive (however, it requires that the earnings figure used in the actual calculation of diluted EPS include discontinuing operations, adjustments for changes in accounting policies and corrections of fundamental errors). Paragraph 42 of AASB 133 states: 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. The net profit or loss from continuing operations excludes amounts relating to discontinuing operations; adjustments for changes in accounting policies that affect the current reporting period but relate to prior reporting periods; and corrections of fundamental errors. We will assume that in this question it is also equal to $70m. Apply trigger test We have already determined the order in which to include potential ordinary shares in the calculation of diluted EPS.

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Profit and adjustments Net profit from continuing ordinary operations

Ordinary shares

$70 000 000

90 080 609

Nil

2 000 000

$70 000 000

92 080 609

$300 000

2 000 000

$70 300 000

94 080 609

Options

Convertible notes

EPS

Dilutive?

$0.7771

$0.7602

Yes

$0.7472

Yes

In the above calculation, profit or loss from continuing operations is the starting point in the ‘trigger test’. After this point, each potential ordinary share is considered in order of smallest earnings per incremental share to largest earnings per incremental share. If a particular security does not dilute EPS then it is not to be included when calculating diluted EPS, unless the conversion is mandatory, or conversion is probable and at the option of the entity. Calculation of diluted EPS Profit As reported for basic EPS Options Convertible debentures

Ordinary shares

$70 000 000

90 080 609

Nil

2 000 000

$300 000

2 000 000

$70 300 000

94 080 609

Diluted EPS = $70 300 000 ÷ 94 080 609 = $0.7472.

27.16 Calculation of Basic Earnings Profit attributable to Members of the Parent Entity $16 488 000 Less Preference Share Dividends (30/9/2008) $360 000 Less Cumulative Preference Dividends not paid, nor Provided for (31/3/2009) [$6 000 000 x 0.06] $360 000 Basic Earnings, based upon Total Profit $15 768 000 Add Loss from Discontinuing Operations after related Income Tax Basic Earnings, based upon Profit from Continuing Operations

Solutions Manual t/a Australian Financial Accounting 5/e by Craig Deegan

$492 000 $16 260 000

27–15

The preference shares issued on 1 March 2009 were not entitled to dividends at 30 June 2009 and no partial dividend entitlement has been accrued. Calculation of Basic Weighted Average Number of Shares Share Issue Weighting

Original 1/7/2008 Public Issue 1 December 2009 Partly Paid Shares Rank for Dividends 1 April 2009 Share Buy Back 1 May 2009 Total

1 = 365/365 212/365 91/365 61/365

Number of Shares

4 600 000 8 000 000 = 480 000 x 0.3 = 144 000

Weighted average num ber of share s 4 600 000 4 646 575 35 901

(260 000)

(43 452) 9 239 024

Calculation of Basic EPS, based upon Profit from Continuing Operations Basic EPS = Basic Earnings, based upon Profit from Continuing Operations = 16 260 000 = $1.7599 per share Basic Weighted Average Number of Shares = 9 239 024

Calculation of Basic EPS, based upon Total Profit Basic EPS = Basic Earnings, based upon Total Profit . Basic Weighted Average Number of Shares

= =

15 768 000 9 239 024

Solutions Manual t/a Australian Financial Accounting 5/e by Craig Deegan

=$1.7067 per share

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