ACCA FR · Guided practice (Show me how)
Chapter 19: Earnings per share (IAS 33)
Diluted EPS - convertibles and share options
Flanagan makes up its accounts to 31 December and has calculated basic EPS for the year ended 31 December 20X5 on 1,000 million shares and earnings of $500m.
Convertible debentures. Throughout 20X5 Flanagan had in issue $10m of 5% convertible loan stock. The loan stock is convertible on 31 December 20X6 at 125 shares for every $100 of loan stock, or on 31 December 20X7 at 120 shares for every $100 of loan stock. The tax rate is 20%.
Share options. Flanagan has also granted 100 million options. These options were outstanding throughout 20X5. The option price is $2.50 and the average fair value of a share is $4.00.
The convertible loan stock
Calculate the increase in Flanagan's earnings, the additional shares and the diluted earnings per share attributable to its convertible loan stock for 20X5.
The share options
Calculate Flanagan's free shares and diluted earnings per share attributable to its share options for 20X5.
Fully diluted EPS
Calculate Flanagan's fully diluted earnings per share for 20X5 and state the required earnings per share disclosure.
Opening this exercise…