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I have an another doubt concerning the use of bonus fraction. As in your lectures you have mentioned that we use bonus fraction only when their is a rights issue but in the question below from Kaplan kit, they have calculated bonus fraction even though their is no rights issue. Can you please tell me where am I going wrong?
“On 1 January 20X4, Sam Co had 3 million ordinary shares in issue. On 1 June 20X4, Sam Co
made a 1 for 3 bonus issue. On 30 September 20X4, Sam Co issued a further 1 million
shares at full market price. Sam Co had profits attributable to ordinary equity holders of
$2 million for the year ended 31 December 20X4.
What is the basic earnings per share figure for the year ended 31 December 20X4,
according to IAS 33 Earnings Per Share?
Answer is A
EPS = $2,000,000/4,250,000 (W1) = 47.1¢
(W1) Weighted average number of shares
Date / Number / Fraction of year / Bonus fraction / Weighted average
1 January / 3,000,000 5/12 4/3 1,666,667
1 June / 4,000,000 4/12 1,333,333
30 September / 5,000,000 3/12 1,250,000
If you chose C or D, you have failed to apply the bonus fraction correctly. If you chose B you
have ignored the bonus fraction.
We apply the bonus fraction when there is a bonus issue of shares. The fraction is calculated as the number of shares in issue after the bonus issue divided by the number in issue before the bonus issue. So with a 1-for-3 this would be 4/3.
This is then applied to the number of shares in issue prior to the bonus issue taking place.
Now I get it!
Thank you for your time and feedback 🙂
Hi, I am a little confused as to how the fraction of the year has been worked out for this question, can you please help?
The fraction takes the number of shares in issue after the bonus issue divided by the number in issue before the bonus issue. See if you can then work of the fraction from this given that it is a 1-for-3 bonus issue.