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hi mike
for the earnings per share (dilution)- Share options
If the option is announced at 1 july and the potential shares are 50000, Suppose the year end is 31st december, BPP Says that we should take the weighted average number of share which will be 25000. ( and then carry on with the number of free shares etc)
but should we not take the entire 50000, as if the shareholders want they can exercise the full amount not just 25000 in the last six months?
Ah, but they couldn’t have exercised their option at a date earlier than the option being granted
The principle here is to pretend that the option holders (or preference shareholders or convertible debenture holders) exercise their conversion rights as at the earliest date possible
Normally, that will be the first day of the accounting period
But if the option is granted (preference shares issued / debentures issued) part way through the year, that option / conversion could not have taken place on the first day of the accounting period … no matter how hard we pretend that it did!
OK?
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