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Hi,
Would you pls clarify how EPS with bonus issue in the middle of the period shoud be treated?Its confusing how in Opentuition study text the EPS bonus issue is adjusted with “bonus fraction”, as well as in some other web site,
and
at the same time in the BPP Study book they dont apply any fraction. The same thing is in http://www.accounting-simplified.com where they say “Note that even though bonus shares were issued half way through 2012, they are included in the calculation of weighted average shares without time apportionment for both 2012 and 2011 (i.e. as if the bonus shares had been issued before the year 2011).” So, they apply no time apportionment nor bonus fraction.Regards,
P SimsHi Petya
No problem!
With the columns Date, Number, Period, Fraction Wanes imagine 4 million shares as at 1 January and a 1 for 4 bonus issue on 1 April
The top line will read:
1 January 4,000,000 3/12 5/4 1,250,000 followed by
1 April 5,000,000 9/12 – 3,750,000 and a total Wanes of 5,000,000If I remove the time apportionment from those 2 lines, I finish up with:
4,000,000 x 5/4 for the full year = 5,000,000
So the effect of the bonus is that, before the bonus the period calculation is:
4,000,000 x 3/12 x 5/4 = 5,000,000 x 3/12 and after the bonus the period calculation is:
5,000,000 x 9/12 = 5,000,000 x 9/12
So, in aggregate, we have 5,000,000 x 3/12 plus 5,000,000 x 9/12 and that’s the same as …. 5,000,000
Apparently the BPP text adopts this ‘short-cut’ approach
I’m much happier with my “Do Not Pay For Women” simplistic approach
OK?
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