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lecture note chapter 21, example 5.

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › lecture note chapter 21, example 5.

  • This topic has 1 reply, 2 voices, and was last updated 10 years ago by MikeLittle.
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  • March 25, 2015 at 7:28 am #238687
    yunjeong
    Member
    • Topics: 3
    • Replies: 1
    • ☆

    Hello. I want to ask you a question about example 5 of chapter 21.

    Question : Edgars had in issue throughout the year ended 31 December, 2009, 3,370,000 $1 equity shares, an earning for the year, after tax at 25%, were $10,000,000. Of this amount, $900,000 was from discontinued operation.

    When calculating basic EPS, I calculated the earning first. which is,
    10,000,000-900,000=9,100,000
    I deducted 900,000 because it occurred from discontinued operations.

    In the lecture note, it says that EPS is 10,000,000/3,370,000=19.64

    I thought when you calculate Earning, i needed to deduct the results of discontinued operations and preference dividend.

    Could you explain? Thank you !!

    March 25, 2015 at 1:35 pm #238753
    MikeLittle
    Keymaster
    • Topics: 27
    • Replies: 23309
    • ☆☆☆☆☆

    Earnings for the year just ended include the earnings from discontinued operations.

    When looking ahead for the purposes of determining dilutive or anti-dilutive, we ignore the earnings from discontinued operations.

    Having determined which conversions are anti-dilutive, we can now go ahead and calculate the figure to be shown this year as diluted earnings per share, but that calculation INCLUDES the earnings from the discontinued operations.

    In summary, we exclude those earnings ONLY for the purposes of determining dilutive / anti-dilutive

    Ok?

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