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How do i find the Earnings per share without being given the number of shares or earnings?
Qn) Clove is a company listed on a recognised stock exchange. It’s financial instruments for the year ended 31 December 20X7 showed earnings per share of 85 cents.
On 1 july 20X8 Clove made a 3 for 1 bonus issue.
According to IAS 33, what figure for the 20X7 earnings per share will be shown as comparative information in the financial statements for the year ended 31 December 20X8?
“It’s financial instruments for the year ended …..” It’s financial instruments?
Is this the same as “It’s financial statements ….”?
Look at the course notes. Look for “bonus issues” Look at the two rules to be applied in the event of a bonus issue. Look particularly at rule 2.
Now, apply rule 2
Then, if you need to, post your question to me again
Another question below,
Qn) Stroke is a company listed on a recognised stock exchange. Given below is an extract from its SOPL for year ended 31 December 20X7.
Profit before tax $580 000
Income tax expense $150 000
Profit after tax $ 430 000In addition to the above information the company paid during the year an ordinary dividend of $40 000 and a dividend on its redeemable preference shares of $50 000.
The company had $100 000 of $0.50 ordinary shares in issue throughout the year and authorised share capital of 1000 000 ordinary shares.
What would be the basic earnings per share figure for the year according to IAS 33?
Assuming the $50,000 preference dividend has been correctly charged as an expense in computing profit before tax, the earnings per share is calculated as earning (profit after tax) divided by (weighted average number of ) equity shares (in issue throughout the year)
Is that what you thought too?
Did you sort out the first problem?
Qn on clove.
The rule for bonus issue is that it is deemed to have been issued at the start of the year no matter when it was issued. The question is asking for the comparative EPS for 20X7 right? So based on this i still don’t understand how to calculate because the bonus fraction is not given.
Of course the bonus fraction is given!
Look at the course notes on how to calculate a bonus fraction and then use this information that you gave me:
On 1 july 20X8 Clove made a 3 for 1 bonus issue.
Come back to me again if it’s still not clear
Qn on stroke.
Yes, thats what i did. I took the profit after tax (430 000) ÷ no. of shares ( 200 000 + 1000 000) . But my answer is wrong. I didn’t adjust the profit with the ordinary dividend ( 40 000) or the redeemable preference dividend (50 000) because as far as i understood so far , only the irredeemable preference dividends and NCI is subtracted from the Profit after tax. Which is the correct way of solving this qn ?
“÷ no. of shares ( 200 000 + 1000 000) ” – WHY!!!!????? Why have you taken into account the 1 million authorised share capital. It’s authorised – it’s not issued! You are told what is the issued capital – it’s $100,000 equity shares of 50 cents each
Not only that …. the $100,000 worth of issued 50 cent equity shares (so 200,000 shares) are part of that 1,000,000 authorised. So that’s a double error of principle!
If you’re not sure about authorised and issued share capital you can look at F4 law course notes but BEWARE!!! There is now NO SUCH THING as authorised share capital
the answer to Stroke question looks to me (if you have given me full information!) to be:
$430,000 / 200,000 = $2.15 earnings per share
But the answer in the suggested solution for the earnings per share is $1.90.
Qn on clove
I mange to work out the bonus fraction. Its 4/3. Therefore,
comparative eps for 20X7
= basic eps for 20X7 ÷ bonus fraction
= 85 cents ÷ 4/3
= 64 cents.But the answer given is 21.2 cents.
“But the answer in the suggested solution for the earnings per share is $1.90.” – in which case the preference dividend has NOT been treated correctly. The $30,000 profit after tax has been reduced by $50,000 preference dividend down to $380,000 and that adjusted profit is divided by 200,000 shares to give $1,90 EPS
Either the question is wrong (preference dividend should already have been deducted in arriving at Profit before tax) or you have not given me full information
What EXACTLY did the question say about the preference dividend?
re Clove …..
RTFQ!!!!!!!
“On 1 july 20X8 Clove made a 3 for 1 bonus issue”
Look at the notes again.
Now read them CAREFULLY
Now look at the details of the bonus issue
Now, post again if you still can’t see where you’re going wrong
(And the answer is actually 21.25 cents EPS)
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Hello,
May i know that how can i take the video lecture of IAS 33. There is not lecture for it. And i need to learn from basic. Please help.
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