Page 171 - Microsoft Word - 00 IWB ACCA F7.docx

Earnings per share

Basic EPS

1.1 Basic calculation of EPS

Earnings
—————–—
Number of shares

 Earnings = profit available to ordinary shareholders

 Number of shares = weighted average number of shares

1.2 Weighted average number of shares

The calculation of weighted average will depend on the type of share issue:

 Full market value issue – use weighted average table

 Bonus issue – assume bonus shares issued with original shares, so in issue for
whole of current year

 Rights issue – use weighted average table, with pre-issue shares adjusted for
bonus element using rights issue bonus fraction

1.3 Weighted average table pro-forma

No of shares × Fraction of × Bonus = Weighted
year held fraction (if average
applicable)
b/f X × X / 12 × X X

Issue X
——

Total X × X / 12 X
—— ——

Weighted average = X
——

165