Page 500 - SBR Integrated Workbook STUDENT S18-J19

Chapter 25

Example 2

Earnings per share

Land

The land should be revalued to its fair value of $0.9 million and a gain of $0.3
million recorded in other comprehensive income.

Dr PPE $0.3m

Cr OCI $0.3m

This adjustment has no impact on profit and so will not affect basic or diluted
EPS.

Building

This is an equity-settled share-based payment. The transaction is with a
supplier so will be valued directly using the fair value of the building. As such,
the building should be initially recorded at $2 million and a corresponding entry
made to equity.

Dr PPE $2m

Cr Share capital (1m × $0.5) $0.5m

Cr Other components of equity $1.5m

Depreciation of $0.1 million ($2m/20 years) should be charged to profit or loss.

Dr Depreciation expense $0.1m

Cr PPE $0.1m

The depreciation will reduce profits, reducing earnings per share. Moreover,
the number of shares used in the basic EPS calculated will increase by 1
million, which will further reduce basic EPS for the period.

494