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Hi would be grateful if any one can shed light on this bonus issue.
Claire’s book page 132:
It shows how to calculate restated EPS for previous year if there is a bonus issue in current year. I get it, previous year EPS x (no. of shares before the bonus issue/no. of shares after bonus issue).So it does not show how to calculate EPS for current year. According to BPP text, page 294, apparently even in current year, you take (earnings/total no. of shares including bonus issue). No weighted average no. of shares calculated. Is this how it is done? There is no need to calculate weighted average no. of shares?
Another question: BPP revision kit, question 66 (Savoir).
I don’t understand why part a, for the year ended 31 March 20X4, in the bonus issue, in calculating weighted average no. of shares, a bonus fraction of 5/4 is used?
Thank you.
Hello !
Quote:Claire’s book page 132:
It shows how to calculate restated EPS for previous year if there is a bonus issue in current year. I get it, previous year EPS x (no. of shares before the bonus issue/no. of shares after bonus issue).So it does not show how to calculate EPS for current year. According to BPP text, page 294, apparently even in current year, you take (earnings/total no. of shares including bonus issue). No weighted average no. of shares calculated. Is this how it is done? There is no need to calculate weighted average no. of shares?
Yes, the EPS for previous year would be re-stated to preserve comparability. It can be calculated as Previous Year EPS x (no. of shares before the bonus issue/no. of shares after bonus issue)
Regarding current year, the bonus issue date is ignored and the number of ordinary shares are adjusted as if the bonus issue had occurred at the beginning of the earliest period reported.
For example, shares outstanding at 01 Jan 2008 are 6,000,000 shares. Made a bonus issue of 2 for 1 share held (dis-regard the date). Profit for 2008 is $225,000,000 and $180,000,000 for 2007.
For the Current Year (2008): $225,000,000/[6,000,000 + (6,000,000 x 2/1)*] = $12.5
*18,000,000 shares
For the Previous Year (2007 – Re-stated): $180,000,000/18,000,000 = $10
Quote:Another question: BPP revision kit, question 66 (Savoir).I don’t understand why part a, for the year ended 31 March 20X4, in the bonus issue, in calculating weighted average no. of shares, a bonus fraction of 5/4 is used?
The bonus fraction is Cum/Ex. In this example, Cum. is 5 and Ex is 4 (made up from one new ordinary share for every four ordinary shares held)
HTH
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