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Diluted EPS

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › Diluted EPS

  • This topic has 2 replies, 2 voices, and was last updated 3 years ago by alawi sayed.
Viewing 3 posts - 1 through 3 (of 3 total)
  • Author
    Posts
  • August 6, 2021 at 12:12 pm #630584
    alawi sayed
    Participant
    • Topics: 301
    • Replies: 352
    • ☆☆☆☆

    Hello Sir,

    Why in the calculation of diluted EPS they ignored the rights issue of shares of 1 to 5 ,that also will add to the no of shares and consequently dilute the EPS? and what they mean by
    the granting during the year of directors’ share options exercisable in three years’ time, do they mean that these options applicable to directors only.

    Thanks,

    ————————————————————————————————————————-
    Aqua Co has correctly calculated its basic earnings per share (EPS) for the current year.
    Which of the following items need to be additionally considered when calculating the diluted EPS of Aqua Co
    for the year?
    (i) A 1 for 5 rights issue of equity shares during the year at $1.20 when the market price of the equity
    shares was $2.00
    (ii) The issue during the year of a convertible (to equity shares) loan note
    (iii) The granting during the year of directors’ share options exercisable in three years’ time
    (iv) Equity shares issued during the year as the purchase consideration for the acquisition of a new
    subsidiary company
    A All four
    B (i) and (ii) only
    C (ii) and (iii) only
    D (iii) and (iv) only

    The answer

    C The issue during the year of a convertible (to equity shares) loan note
    The granting during the year of directors’ share options exercisable in three years’ time

    The convertible loan note and the share options should be taken into account when
    calculating diluted EPS.

    August 8, 2021 at 10:21 am #630750
    P2-D2
    Keymaster
    • Topics: 4
    • Replies: 7163
    • ☆☆☆☆☆

    Hi,

    For the diluted EPS figure we only need to consider convertible debt instruments and share options within the calculation as explained in the videos.

    The rights issue will already have been included in the basic EPS calculation, so nothing to adjust for the diluted EPS figure.

    And yes, the narrative in (iii) is referring to share options granted to the directors.

    Thanks.

    August 10, 2021 at 8:40 am #630997
    alawi sayed
    Participant
    • Topics: 301
    • Replies: 352
    • ☆☆☆☆

    Thanks

  • Author
    Posts
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