The IASB issued IAS 33 Earnings Per Share in 1997 with the objective of determining the principles
The IASB issued IAS 33 Earnings Per Share in 1997 with the objective of determining the principles for the calculation and presentation of earnings per share in order to improve performance comparison. Its main focus is on the denominator of the calculation.
(a) Explain the usefulness of disclosing:
(i) a company’s basic earnings per share
(ii) a company’s diluted earnings per share.
(b) Below are extracts from the financial statements of Bovine for the year to 31 March 20X3:
All shares and loan stocks were in issue prior to the beginning of the current accounting year. The 10 per cent convertible preference shares are convertible to ordinary shares on the basis of three ordinary shares for every five preference shares on 31 March 20X5 at the option of the preference shareholders. The 8 per cent convertible loan stock is redeemable on 31 March 20X5 or can be converted to ordinary shares on the basis of 120 ordinary shares for each €100 of loan stock at the holder’s option. There are also in issue directors’ share options for 4 million ordinary shares. These were issued on 31 March 20X2 and are exercisable on 31 March 20X5 at a price of €1.40 per share. The market price of Bovine’s shares can be taken as €2.00 each. Preference dividends are paid out of taxed profits. Interest on loan stock is an allowable tax reduction. The rate of income tax is 25 per cent.
Calculate Bovine’s basic and diluted earnings per share for the year ended 31 March 20X3.
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