ONETOUCH PROFESSIONAL SCHOOL

IFRS PILLS RELOADED DAY 37 – DILUTED EPS

IAS 33 – Earnings per Share – sets out requirements for the calculation and
presentation of earnings per share in financial statements of listed entities.
The requirements include the disclosure of basic earnings per share and, where
an entity has potential ordinary shares in issue, the additional disclosure of
diluted earnings per share in certain circumstances. Ewusiwa is a listed entity
with a number of subsidiaries.
Extracts from the consolidated statement of profit or loss and other
comprehensive income of Ewusiwa for the year ended 30 September 2018 appear
below:
Group NCI Total
GHS'000 GHS'000 GHS'000
Profit for the year 39,000 3,000 42000
Other Comprehensive income 5,000 Nil 5000
Total comprehensive Income 44,000 3,000 47000

The long-term finance of Ewusiwa comprises:

(i) 200 million ordinary shares in issue at the start of the year. On 1 January
2018, Ewusiwa issued 50 million new ordinary shares at full market value.
(ii) 80 million irredeemable preference shares. These shares were in issue for
the whole of the year ended 30 September 2018. The dividend on these
preferenceshares is discretionary.
(iii) GHS180 million 6% convertible loan stock issued on 1 October 2016 and
repayable on 30 September 2021 at par. Interest is payable annually in
arrears. As an alternative to repayment at par, the lenders on maturity can
elect to exchange their loan stock for 100 million ordinary shares in
Ewusiwa. On 1 October 2016, the prevailing market interest rate for five-
year loan stock whichhad no right of conversion was 8%. Using an annual
discount rate of 8%, the present value of GHS1 payable in five years is
GHS0·68 and the cumulative present value of GHS1 payable at the end of
years one to five is GHS3·99.
(iv) In the year ended 30 September 2018, Ewusiwa declared an ordinary
dividend of 10 cents per share and a dividend of 5 cents per share on the
irredeemable preference shares.
(v) The annual rate of income tax applicable to Ewusiwa and its subsidiaries is
20%.
(vi) All transactions have been correctly accounted for in the financial
statements of Ewusiwa for the year ended 30 September 2018

1|Page
Required:
a) Explain the meaning of the term ‘potential ordinary shares’ and provide
TWO examples of potential ordinary shares OTHER THAN convertible loans.
b) Explain how the diluted earnings per share is calculated and when it needs to
bedisclosed.
c) Compute the basic and diluted earnings per share amounts for Ewusiwa for
the year ended 30 September 2018 which will be presented in its
consolidated financial statements for that year.

WHATSAPP: 0549573161 / 0205396886

Join IFRS Pills Telegram page & get the FR & CR DIARY
ONETOUCH ICAG INTERVENTION STARTS ON 16 FEBRUARY 2024. KINDLY
WHATSAPP US TO REGISTER

2|Page
 ONETOUCH PROFESSIONAL SCHOOL
IFRS PILLS RELOADED DAY 38 – DILUTED EPS
Amponsah Ltd is an entity holding securities that are publicly traded on the
Ghana Stock Exchange. Extracts from the income statement of the entity for the
year ended 30 September 2014 are given below:
Year ended 30 September

2014 2013
GHS000 GHS000
Profit from operations 70,000 60,000
Finance cost (18,000) (10,000)
Profit before tax 52,000 50,000
Income tax expense (15,000) (12,500)
Profit for the period 37,000 37,500

Before 1 April 2014 the issued capital of Amponsah Ltd had been 400 million
GHS1 shares for a number of years. Then on 1 April 2014 the entity made a rights
issue of one share for every four held at GHS4 per share. The market value of
Amponsah Ltd’s share immediately before the rights issue was GHS5.

On 31 October 2014 Amponsah Ltd made a bonus issue of one ordinary sharefor
every one ordinary share held at that date. No other changes to the issuedordinary
share capital occurred in October 2014. The 2014 financial statements were
approved by the directors on 30 November 2014.
Throughout the year ended 30 September 2014 Amponsah Ltd has had the
following potential ordinary shares in issue:

• Options to buy 50 million shares at GHS3. The average price of an ordinary

share in Amponsah Ltd for the year ended 30 September 2014 was GHS5.
• A GHS100 million loan with an annual finance cost of 10%. The loan is
repayable on 30 September 2018 or convertible into 40 million ordinary
shares on that date.
The rate of corporate income tax is 25%.

Required:
Compute the basic and diluted earnings per share for Amponsah Ltd that will be
published in the financial statements for the year ended 30 September 2014. You
should compute a comparative figure for the basic earnings per share

WHATSAPP: 0549573161 / 0205396886

Join IFRS Pills Telegram page & get the FR & CR DIARY
ONETOUCH ICAG INTERVENTION STARTS ON 16 FEBRUARY 2024. KINDLY
WHATSAPP US TO REGISTER

3|Page
 ONETOUCH PROFESSIONAL SCHOOL
IFRS PILLS RELOADED DAY 39 – DILUTED EPS
Below are extracts from the financial statements of Boama for the year to 31
March 2013:
Income statement:
Continuing Discontinuing Total
operations operations
GHS000 GHS000 GHS000
Profit (loss) before tax 1,580 (320) 1,260
Tax (charge) relief (280) 50 (230)
Profit from the ordinary activities 1,300 (270) 1,030

Statement of financial position:

Ordinary shares of 25Gp each 1,800
6% non-redeemable preference shares 500
10% Convertible preference shares GHS1 each 1,000
Non-current liabilities
8% Convertible loan stock 1,500

(i) all shares and loan stocks were in issue prior to the beginning of thecurrent
accounting year.

(ii) The 10%convertible preference shares are convertible to ordinary shares on

the basis of three ordinary shares for every five preference shares on 31 March
2015 at the option of the preference shareholders. The 8% convertible loan
stock is redeemable on 31 March 2015 or can be converted to ordinary shares
on the basis of 120 ordinary shares for each GHS100 of loan stock at the
holders’ option.

(iii) There are also in issue directors’ share options for 4 million ordinary shares.
These were issued on 31 March 2012 and are exercisable on 31 March 2015 ata
price of GHS1·40 per share. The average market price of Boama’s shares can
be taken as GHS2·00 each.

(iv) Preference dividends are paid out of taxed profits. Interest on loan stock is an
allowable tax deduction. The rate of income tax is 25%.

Required: Calculate Boama’s basic and diluted earnings per share for the year
ended 31March 2013
WHATSAPP: 0549573161 / 0205396886
Join IFRS Pills Telegram page & get the FR & CR DIARY
ONETOUCH ICAG INTERVENTION STARTS ON 16 FEBRUARY 2024. KINDLY
WHATSAPP US TO REGISTER

4|Page
 ONETOUCH PROFESSIONAL SCHOOL
IFRS PILLS RELOADED DAY 40 – DILUTED EPS
The following summarised information is available in relation to OneTouch,a
publicly listed company:
Statement of profit or loss extracts years ended 31 March
2014 2013
Continuing Discontinued Continuing Discontinued
GHS’000 GHS’000 GHS’000 GHS’000
Profit after tax

Existing 2,000 (750) 1,750 600

operations

Operations
acquired
on 1 August 450 nil
2013
Analysts expect profits from the market sector in which OneTouch’s existing
operations are based to increase by 6% in the year to 31 March 2015 and by 8% in
the sector of its newly acquired operations.
On 1 April 2012 OneTouch had:
i. GHS3 million of 25 pesewas equity shares in issue.
ii. GHS5 million 8% convertible loan stock 2019; the terms of conversion are
40 equity shares in exchange for each $100 of loan stock. Assumean income
tax rate of 30%. On 1 October 2013 the directors of OneTouch were granted
options to buy 2 million shares in the company for $1 each. The average
market price of OneTouch’s shares for the year ending 31 March 2014 was
$2·50 each.

Required:
a) Calculate OneTouch’s estimated profit after tax for the year ending 31March
2015 assuming the analysts’ expectations prove correct;
b) Calculate the diluted earnings per share (EPS) on the continuing operations of
OneTouch for the year ended 31 March 2014 and thecomparatives for 2013.

WHATSAPP: 0549573161 / 0205396886

Join IFRS Pills Telegram page & get the FR & CR DIARY
ONETOUCH ICAG INTERVENTION STARTS ON 16 FEBRUARY 2024. KINDLY
WHATSAPP US TO REGISTER

5|Page