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The issued share capital of Savoir, a publicly listed company, at 31 March 20X5 was $10 million. Its shares
are denominated at 25 cents each.
On 1 April 20X5 Savoir issued $20 million 8% convertible loan stock at par. The terms of conversion (on
1 April 20X8) are that for every $100 of loan stock, 50 ordinary shares will be issued at the option of loan
stockholders. Alternatively the loan stock will be redeemed at par for cash. Also on 1 April 20X5 the
directors of Savoir were awarded share options on 12 million ordinary shares exercisable from 1 April 20X8
at $1.50 per share. The average market value of Savoir’s ordinary shares for the year ended 31 March 20X6
was $2.50 each. The income tax rate is 25%. Earnings attributable to ordinary shareholders for the year
ended 31 March 20X6 were $25,200,000. The share options have been correctly recorded in the financial
statements.
Required
Calculate Savoir’s basic and diluted earnings per share for the year ended 31 March 20X6 (comparative
figures are not required).
You may assume that both the convertible loan stock and the directors’ options are dilutiveI do not understand why the basic EPS is 25.2m/84m
Where does the 84m come from, sir?
Isn’t the number of shares = 10m/0.25?
There appears to be some history with this question going back at least 4 years
I have, in the past, claimed that the figure of 84 million should be, at least, 84,800,000
But even that is incorrect in my opinion
It seems to me that the denominator for the diluted calculation should be 54,800,000 and that basic eps should be $25,200,000 / 40, 000,000 = 63 cents
OK?
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