Page 113 - Microsoft Word - 00 CIMA F1 Prelims STUDENT 2018.docx

Earnings per share

Basic EPS: Rights issues

4.1 Weighted average number of shares: rights issues

A rights issue is an issue of shares to existing shareholders based on
their existing shareholding at a discounted price

Rights issues are considered, for EPS purposes, as:

 part full price issue

 part bonus issue.

Bonus issues are treated as if they have always existed, so are
scaled up by the bonus fraction.

The same treatment is applied to rights issues. They have a free
element so it will be necessary to scale up any shareholdings before
the rights issue by a bonus fraction.

105