# IAS 33 Earnings per Share part 5 (Example 5)

1. says

Hello sir,what a wonderful lecture,pls am a bit confuse,I don’t really know what this anti-dilutive is all abt,I understood the calculation but don’t no why,when,what it is all abt.pls enlighten me the more pls.

• says

Where a conversion takes place and the result is that earnings per share increases as a result of that conversion, then the eps has not been diluted – it has in fact been improved. And “been improved” in the language of IAS 33 is the same as saying anti-diluted. Think of concentrated orange juice (in the UK we call it orange squash or orange cordial)

When preparing a drink, we pour some cordial into a glass and then dilute it by adding water. The water has a dilutive effect on the orange cordial

But if we put too much water in, then the drink tastes too weak, not fruity enough. To correct that, we could add some more cordial to strengthen the taste. By adding that extra cordial, we would be correcting the effect of having added too much water so the addition of this extra cordial could be said to be anti-dilutive

Ok?

• says

Thank you for those kind words

Did you understand my explanation of dilution of earnings and particularly the concept of anti-dilution?

2. says

Dear Mr. Mike Little, I can only wish to be a tutor like you. Brilliant and very helpful.

Just minor observation, Basic EPS in this example \$750,000/4000,000=0.18 Cents, correct?

3. says

hello sir,

can you please explain me how did we compare which loan stock is more diluted as compared to the other loan stock in the ex 5

• says

hello sir, please can you help me with this eps ex5 … how do see that which loan stock is more dilutive ? .. do we look at the date when it was issued or we focus on the MEPS?

thank you

• says

MEPS is the route to follow to determine which of two similar instruments is the more dilutive

Ok?

• says

ok that means lower the MEPS, that loan stock is more dilutive?

secondly, i also wanted to ask if for example while calculation anti dilution, loan stock #1 was anti dilutive so we will stop with the option itself or do we take loan stock #2 and option for the calculation of diluted eps?

thank you sir.. you are an amazing lecturer.. not only you made p2 a ‘bit’ easier for me through the lectures lol but also you have helped a lot in solving my problems. thank you so much

• says

Hi Shreya

Thanks for those kind words

You need to work out (in the correct sequence) whether a loan stock conversion is dilutive or anti-dilutive

The “correct” sequence will not always be that the first loan stock conversion is less than the second so you need to calculate MEPS for both

Ok?

• says

So that means for example while calculating anti dilution effect in “correct” sequence if i get these final figure for anti dilution effect:
eps
b/f (control fig) 15c
option 0
loan stock 1 9.5c
loan stock 2 9.3c

so that means after this when i will calculate Diluted Eps il take the b/f shares, options and loan stock 2 in calculation and exclude the loan stock 1 as it is anti dilutive?

OR
in the correct sequence it will always be that the second or the last one (if more loan stocks given) will be anti dilutive?

thank you sir
and also I have asked you one more ques related to IAS 41 in the ask tutor thread. please if you could help me out with that as well

thank you sir

4. says

How can I view other lectures after this chapter, I am not able to see lectures link after chapter 16 EPS.

• says

Hi, there are no further lectures after chapter 16.

May I ask you to read other posts on this thread that explain why there are no more lectures and why you need not be despondent about the “missing” topics

5. says

Dear little Mike, Will it be possible u can record it before june 2014 any new chapter which is not recorded as i am going to sit in next june. ur my one of the best lecture ever i met. may god Bless u always. please reoly.

• says

Hi Hixam

Substantially all the topics in those later chapters are either F7 revision or relatively straight forward. There is a revised chapter on single company reconstruction accounting – re-written last month and a bit of an amendment to consolidations – changes in group structures chapter

Otherwise I have to rely on your own efforts for things like Revenue recognition

• says

Dear mike,
So from Chapter,

17 Reconstructions 141
18 IFRS 9 Financial Instruments 153
19 IFRS 2 Share based payment schemes 159
20 Report writing and interpretation of financial statements 167
21 IAS 1 – Presentation of financial statements 173
22 IAS 8 – Accounting Policies, Changes in Accounting Estimates and Errors 175
23 IAS 24 Related parties (rps) 177
24 IAS 34 Interim financial reporting – disclosures 181
25 IAS 40 Investment properties (ip) 183
26 IAS 12 Deferred tax (dt) 189
27 IFRS 1 First Time Adoption of IFRS 197
28 Management Commentary 201
29 Small and Medium (sized) Entities – SMEs

From this chapters, will there be any video available before next june? or shall i have to work my self? and relatively straight forward what u mean is only for chapter 16 or for those other chapter?

thanx a lot mike, ur just gifted on earth n because of u people like us are understanding that we are studying.

• says

• says

Hi Hixam – sorry, but all those chapters are down to you. There are no plans at the moment to record anything from these topics

• says

Hey Gingergirl – I am quite capable of answering my own messages, thank you.

You are correct though – as I have said before (if not on this thread, then on another) Hixam, there are no plans just yet for me to record any more lectures on these “missing” topics

• says

Sorry Mike – its just that I’ve read on here you making that same comment so often that I thought I would save you having to write it all again.

• says

After chapter 16 there are no lectures. The lectures are recorded over 5 days – the entire length of our courses. Obviously we have to rely on students to do their own studying on those topics that are not covered in lectures. Many of the “missing” topics are F7 revision and others are relatively straight forward.

Should you have any particular issue with any of the topics, of course you can ask for an explanation but I may well respond and say, for example, “there are two good articles in Student Accountant by Tom Clendon covering all that you need to know”

There are no plans to record any new lectures in the near future but I am always here to answer your questions where you come up against any matter that you cannot fully understand

6. says

Really wish to have some lectures over chapters 17-28, especially reconstructions and share based payments :S
You think you can have them “on time” before the December 2013 exam…? Would really be great!

• says

Absolutely ….no chance! Sorry but it’s not going to happen. No time and no ready access to recording facilities

• says

sir, Will it be possible u can record it before june 2014 exam as i am going to sit in next june. ur my one of the best lecture ever i met. may god Bless u always.

7. says

Mr. Mike,

Great Lecture. I want to be a teacher like you in future.

8. great lecture. wish we could have a lecture on financial instruments: that topic is very boring to read

9. says

hi Mike,
i have given the lecture on Eps 5 star or AAA rating. (top in OT).
bravo Mike, well explained.

• says

@gts7, No, surely! I was getting quite fascinated that you may be thinking of a change of gender or an age reduction, whichever gender you started with

• says

@MikeLittle, hahaha 😀 Very funny. It was a typo actually.

And what is the explanation to my doubt?

Thanks

• says

@gts7, I’m so sorry – I answered it, but it hasn’t appeared! So here goes again.

In the working to determine whether any conversions are anti-dilutive, we ignore the earnings from the discontinued operation because it will not contribute to profits in the future and our Global Investor wants to know the situation “going forward”

However, the basic question is “What would this year’s EPS have been if all these conversions HAD in fact taken place this year and the profits from Vanuatu DID contribute to this year’s earnings figure.

Is that clear?

• says

@MikeLittle, Very clear and concise explanation Thank u very much Mr. Mike

10. says

Hello Mr. Mike.
Bravo to Mr. Mike and Admin.

However Mr. Mike, I’d be lad if you’d clear my doubt on this:

Why is it in the final step (calculation of DEPS) the brought forward earnings are \$750,000 and not \$600,000 as calculated in the second last step (determining if any instruments are anti-dilutive)?
In other words why is it that the net earnings attributable to the discontinued operation of \$150,000 not deducted from the \$750,000?

Thank you very much

11. says

Sir, in December 2012 P2 notes, we have \$200,000 profit from discontinued operations which is included in earnings.So earnings would be 750,000 – 200,000=550,000 so EPS of equity shares b/f would be 550,000/4000,000=13.75

(example 5)

am i right?

• says

@MikeLittle, oh….i got it now….it should be 750,000-150,000=600,000

12. says

Hi!
I think that Mike is doing great, great job and his tution is really above any expectations of mine. His explanations on every topic available on this site does help to understand the paper. However, because he is doing so great job and because of his briliant way of doing tution I would very much appreciate if you (opentution tutors) could put up the rest of the paper. If not the whole rest than at least those chapters containing exercises. Thank you very much, Mike

13. says

@ faip3 We are NOT sitting here on bank of lectures!! we upload what we have.

14. says

Mr. Little, Admin, Do u not think you have a constructive obligation to put up IAS 39? Being that you’ve previously put up all those stds that r critical in the exams? Are u not now obliged to provide us with 39 as well? Our expectations of u r high & based on your past behavior of uploading lectures

15. says

brilliant lecture , i will say that the way he taught IAS 33 was awesome really gud @ above no prob with link bro just refresh n it will b fine