Page 129 - F2 Integrated Workbook STUDENT 2019

Earnings per share

Diluted EPS

5.1 What is diluted EPS and why is it needed?

At the year-end, transactions may exist that could create future share issues. For
example:

 convertible loans

 options

Diluted EPS provides investors with further information about the
impact of these potential shares on EPS. It provides a worst case
scenario EPS calculation.

Diluted EPS (DEPS) is calculated as:

Earnings + notional extra earnings
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WAV number of ordinary share + notional extra shares

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