EPS

Hello Chris,

I have an another doubt concerning the use of bonus fraction. As in your lectures you have mentioned that we use bonus fraction only when their is a rights issue but in the question below from Kaplan kit, they have calculated bonus fraction even though their is no rights issue. Can you please tell me where am I going wrong?

“On 1 January 20X4, Sam Co had 3 million ordinary shares in issue. On 1 June 20X4, Sam Co
made a 1 for 3 bonus issue. On 30 September 20X4, Sam Co issued a further 1 million
shares at full market price. Sam Co had profits attributable to ordinary equity holders of
$2 million for the year ended 31 December 20X4.

What is the basic earnings per share figure for the year ended 31 December 20X4,
according to IAS 33 Earnings Per Share?

A 47.1¢
B 52.2¢
C 56.8¢
D 50.0¢

Answer is A

A
EPS = $2,000,000/4,250,000 (W1) = 47.1¢

(W1) Weighted average number of shares
Date / Number / Fraction of year / Bonus fraction / Weighted average
1 January / 3,000,000 5/12 4/3 1,666,667
1 June / 4,000,000 4/12 1,333,333
30 September / 5,000,000 3/12 1,250,000
–––––––––
4,250,000
–––––––––
If you chose C or D, you have failed to apply the bonus fraction correctly. If you chose B you
have ignored the bonus fraction.