accounting matrix

8/6/2019 Accounting Matrix

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Account Name

Earnings per share

Basic Earnings per share


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Diluted Earnings per share

Ordinary share

Equity instrument

Potential ordinary share

Financial Instrument

Warrants or Options

Dilution

Antidilution


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Convertible Preference share

Convertible Bonds payable

Incremental ordinary shares

Bonus issue


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Rights issue

Written put options

Contingent ordinary shares


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Definition

The amount attributable to every ordinary share outstandingduring the period.

An entity shall calculate basic EPS for profit or lossattributable to ordinary equity holders of the parent entity

and, if presented, profit orloss from continuing operations attributable to those equity

holders.


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An entity shall calculate diluted EPS amounts for profit orloss attributable to ordinary equity holders of the parent

entity and, ifpresented, profit or loss from continuing operations

attributable to those equity holders.For the purpose of calculating diluted EPS, an entity shall

adjust profit or loss attributable to ordinary equity holders of

the parent entity,and the weighted average number of shares outstanding, for

the effects of all dilutive potential ordinary shares.

An equity instrument that is subordinate to all other classesof equity instruments.

Any contract that evidences a residual interest in the assetsof an entity after deducting all of its liabilities.

A financial instrument or other contract that may entitle itsholder to ordinary shares.

Any contract that gives rise to both a financial asset of oneentity and a financial liability or equity instrument or

another entity.

Financial instruments that give the holder the right topurchase ordinary shares.

Arises when the inclusion of potential ordinary sharesdecreases the basic earnings per share or increases the

basic loss per share.

Arises when the inclusion of the potential ordinary sharesincreases basic earnings per share or decreases basic loss

per share.


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The computation of diluted earnings per share assumes thatthe preference share is converted into ordinary share.

The computation of diluted earnings per share assumes thatthe bond payable is converted into ordinary share.

Represent the issue of ordinary shares for no consideration.Accordingly, these are the potential ordinary shares that areincluded in the computation of diluted earnings per share.

Ordinary shares are issued to existing shareholders for no

consideration. Therefore, the number of ordinary shares isincreased wiothout increase in resources.


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When rights are issued to shareholders most often theexercise price is less than the fair value of the shares.

Contracts that give the holder the right to sell ordinary

shares at a specified price for a given period.

Ordinary shares issuable for little or no cash or other

consideration upon satisfaction of a specified conditions in acontingent share agreement.


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Initial Recognition Subsequent Recognition


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a bonus issue is a stock dividend


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The number of ordinary shares to be usedin calculating basic EPS for all periods prior

to the rights issue is the number ofordinary shares outstanding prior to therights issue multiplied by an adjustment

factor


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Entries/ Computation

1. The basic formula is as follows:Basic EPS = Net Income

Ordinary shares outstanding

2. The net income is equal to the amount after the deducting dividendson preference shares.If the preference share is cumulative, the preference dividend for thecurrent year only is deducted from the net income, whethere suchdividend is declared or not.If the preference share is noncumulative, the preference dividend for thecurrent year is deducted from net income only if there is declaration.

3. If there is a significant change in the ordinary share capital during theyear, the weighted average number of ordinary shares outstanding

during the period should be used as denominator.


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The computation of the Diluted EPS is based on the "as if" scenario:

a. "As if" the convertible bond payable is converted into ordinary share.b. "As if" the convertible preference share is converted into ordinary

share.c. "As if" the share options and warrants are exercised.


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If there is a convertible preference share, the computation of diluted EPSassumes that the preference share is converted into ordinary share.

Accordingly, the net income is not reduced anymore by the amount ofpreference dividend. The number of ordinary shares outstanding is

increased by the number of ordinary shares that would have been issuedupon conversion of the preference share.

If there is a convertible bond payable, the computation of Diluted EPSassumes that the bond payable is converted into ordinary share.

Accordingly, the adjustments shall be made both to net income and to thenumber of ordinary shares outstanding. The net income is adjusted byadding back the interest expense on the bond payable, net of tax. thenumber of ordinary shares outstanding is increased by the number of

ordinary shares that would have been issued upon conversion of the bondpayable.


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An entity shall present Diluted EPS on the face of the incomestatement with equal prominence for all periods presented.


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Disclosure


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transactions had occurred before the end of the reporting period. Examples include issues andredemptions of ordinary shares, warrants and options, conversions, and exercises.

An entity is permitted to disclose amounts per share other than profit or loss from continuingoperations, discontinued operations, and net profit or loss earnings per share. Guidance for

calculating and presenting such amounts is included in IAS 33.73.


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accounting matrix

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