Page 31 - PowerPoint Presentation

EARNINGS PER SHARE

Convertible Instruments

• Convertible instruments (convertible preference

shares or convertible debentures) are dilutive

whenever the basic earnings per share exceeds the

amount of dividend (net of tax) and interest (net of

tax), per ordinary share obtainable on conversion.

• If the instruments are dilutive, the following

adjustments need to be made when calculating

diluted earnings per share:

• The earnings should be increased with the after-tax effect

of interest and dividends that will be saved in the future

when the debentures/shares will be converted, and

• The weighted average number of shares should be

increased with the expected future increase in ordinary

shares resulting from the conversion.

31