Page 179 - Microsoft Word - 00 IWB ACCA F7.docx

Earnings per share

Example 5

DEPS – options

Robert had 6,000 ordinary shares in issue throughout the year to 31
December 20X3.

At that date Robert also had in issue 2,000 share options. These options are
exercisable at $1.20 per ordinary share. The average fair value per ordinary
share during the year was $1.50.

Robert’s earnings for the year to 31 December 20X3 were $1,200.

Required:

Calculate Robert’s diluted earnings per share for the year to
31 December 20X3.

Solution

Bonus element of options = (1.50 – 1.20) × 2,000 = 400 shares
–––––––––––––
1.50

Diluted EPS = 1,200 ÷ (6,000 + 400) = 18.8¢

Illustrations and further practice

Now try TYU questions 5 and 6 from Chapter 14.

173