Page 494 - Microsoft Word - 00 CIMA F1 Prelims STUDENT 2018.docx

F2: Advanced Financial Reporting

5.4 $0.33

Diluted EPS = Notional earnings/Notional weighted average number of shares

Notional earnings for convertible bonds = Earnings + finance costs saved –
extra tax charged

Saving in finance costs = $4.65m × 0.07% = 0.325m

Extra tax = 0.325m × 20% = 0.065m

New shares from conversion = 5m/100 × 10 = 0.5m

Diluted EPS = 3.2 +0.325 -0.065/10 + 0.5

= 3.46/10.5 = $0.33

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