Page 31 - PowerPoint Presentation

Earnings Per Share

Convertible Instruments

• Convertible instruments (convertible preference shares

or convertible debentures) are dilutive whenever the

basic earnings per share exceeds the amount of

dividend (net of tax) and interest (net of tax), per

ordinary share obtainable on conversion.

• If the instruments are dilutive, the following

adjustments need to be made when calculating diluted

earnings per share:

• The earnings should be increased with the after-tax effect of

interest and dividends that will be saved in the future when

the debentures/shares will be converted, and

• The weighted average number of shares should be

increased with the expected future increase in ordinary

shares resulting from the conversion.
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