Deloitte. IFRS Bookmarks: VIEW ADD QuickFind Go Question 2 Quadro S.A. ha1500,00

Question

Deloitte. IFRS Bookmarks: VIEW ADD QuickFind Go Question 2 Quadro S.A. ha1500,000 1iary shares and 2,285,000 profits attributable to these shares. Quadro Message Centre has five potentially ordinary shares, as shown in the graphic. Tax rate is 30% and the preference shares are classified as equity Which of these instruments should be included in Quadro's diluted earnings per share calculation? Select one or more options and click Submit Tools 1 €1,500,000 10% loan convertible 2 400,000 €28% 3 €800,000 5% bonds convertible 4 Opton for 100,000 shares Convertible loan into 50,000 shares Background Coach convertible preference shares convertible into Examples Reference into 100,000 shares convertible bonds exercised in 2006 at 0.95 Clue Options (average market price for 2008s 93) 5 lf profits exceed €2m ilion 10 contingently issuable shares managers will receive 1,000 shares each. Calculator Word SUBMIT Excel EXIT HELP PRINT ACTION PLANNER 3/12

Explanation / Answer

Convertible Preference shares and Convertible bonds: These will be included as all the convertible securities should be included.

Options: In calculating diluted EPS, assume the exercise of outstanding dilutive options and warrants. The assumed proceeds from exercise should be regarded as having been used to repurchase ordinary shares at the average market price during the period. The difference between the number of ordinary shares assumed issued on exercise and the number of ordinary shares assumed repurchased shall be treated as an issue of ordinary shares for no consideration.

Contingently issuable shares: Contingently issuable ordinary shares are treated as outstanding and included in the calculation of both basic and diluted EPS if the conditions have been met. If the conditions have not been met, the number of contingently issuable shares included in the diluted EPS calculation is based on the number of shares that would be issuable if the end of the period were the end of the contingency period. So in this case Contingently issuable shares should be included.

Convertible Loan: Contracts that may be settled in ordinary shares or cash. Presume that the contract will be settled in ordinary shares, and include the resulting potential ordinary shares in diluted EPS if the effect is dilutive.

So, all the options should be included in the calculation of diluted EPS as per above mentioned details.

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