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Hi Mike,
When the question has convertible bonds, example 5 in page 121, conversion terms included 18 equity share on 31 Dec 2012 and 30 equity share on 31 Dec 2014, under what circumstance to use 18 equity or 30 equity. Is it always use the higher one? What is the logic behind?The logic is this … the idea behind the calculation and disclosure of diluted eps is to show the global investor what is the WORST position that could face the shareholders of the future …
… and the WORST position is the one that results in the greatest number of new shares on conversion because they increase the denominator and thus reduce the earnings per share (because there are more shares)
OK?
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