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Most grateful if you could provide me with your assistance on the below question.
Which two of the following do not need to be removed from an entity’s net profit in a statement of profit or loss in order to calculate earnings figure to be used in the earnings per share calculation?
A – Redeemable preference share dividends
B – Irredeemable preference share dividends
C – Profit attributable to the non-controlling interest
D – An error in expenses discovered after the financial statements have been authorised for issue
E – Ordinary dividends
The answers are A & E.
Can you please explain why answer is A and not B. I mean Redeemable preference shares are normally treated as a liability and thus finance costs would normally be charged to the SOPL whereas for Irredeemable preference shares, the dividends paid on these irredeemable preference shares would be charged in the statement of changes in equity. Am I right?
Looking forward for your feedback.
Thanking you in advance.
The answer is A and not B because the finance cost on the redeemable will already have been deducted from profits so we do not need to adjust for this in our EPS calculations.
We will need to deduct the dividend on the redeemable preference shares as this will not have been deducted in the profit for the year figure.