BOOK VALUE PER SHARE

Note:
PS is noncumulative and nonparticipating
• In the absence of any information, Preference share is assumed to be
- Pref shareholders get only dividends for the current year
NONCUMULATIVE and NONPARTICIPATING.
- Balance goes to ordinary share
• Preference dividends in arrears usually include the Current dividends.
• Preference dividends in arrears in prior years shall be specifically disclosed, PS is cumulative and nonparticipating
otherwise, there are no arrearages. -Pref shareholders get dividends + arrears
• If only ONE preference share is participating, the rate of the participating
preference share shall be used as basis for ordinary share dividend. PS is cumulative and participating
-Ordinary shareholders get the current year dividend using pref rate in the
• If there are TWO classes of preference share with different dividend rates and
absence of ordinary dividend rate
both are participating, the LOWER rate shall be the basis for allocation to the
ordinary share.
PS is cumulative and participating up to __%
• For the purpose of computing the number of outstanding shares, the number -PS shall receive the current year a maximum of __% on the par value
of subscribed shares shall be added to the issued shares and the number of
treasury shares shall be deducted from the issued shares. PS is cumulative and nonparticipating, with liquidation value of P___ per share
-Recognise liquidation premium in the excess of P___ over par of pref shares

Formulas: PS has preference as to assets

Shares Amount -dividends in arrears are fully payable
Share capital issued xx xx
Total SHE Share capital subscribed xx xx
BVPS =
Outstanding Shares Total (Legal Capital) xx xx PS has preference as to dividends
Treasury shares at par xx xx
Outstanding xx xx
-if deficit, apportioned between the OS and PS

Illustration:
Problem:

Boeboe Company provided following data at year-end:

On July 1, 2022, 50,000 ordinary shares were issued.
2022 2021
The preference dividends were paid in 2021 but not declared during 2022.
10% cumulative preference shares, PS0 par 2,000,000 2,000,000
Ordinary shares, P10 par 2,500,000 2,000,000 The market price of the ordinary share was PSO on December 31, 2022.
Share premium 1,500,000 1,300,000
Retained earnings 4,800,000 4,200,000 1. What is the book value per preference share for 2022?
Net income for the year 1,800,000 2. What is the book value per ordinary share for 2022?

Solution:

Question 1 Question 2

Preference shares 2,000,000 Preference shares 2,000,000

Preference dividend for 2022 (10% × 2,000,000) 200,000 Ordinary shares 2,500,000
Preference shareholders' equity 2,200,000 Share premium ,1,500,000
Retained earnings 4,800,000
Total shareholders' equity 10,800,000
Preference shareholders' equity (2,200,000)
Number of preference shares (2,000,000 / 50 par) 40,000
Ordinary shareholders equity 8,600,000
Divide by ordinary shares outstanding
(2,500,000 / 10 par value) 250,000
Book value per preference share (2.200,000 / 40,000) 55.00

Book value per ordinary share 34.40

 EARNINGS PER SHARE
PAS 33

Applies to: FS Presesntation:

• PAS 33 requires a dual presentation of the Basic and Diluted earnings per share on the
• Entities whose ordinary shares or potential ordinary shares are
Statement of Comprehensive Income with Equal Prominence.
publicly traded or that are in the process of issuing shares in the public
• If the entity reports a Discontinued Operations, both Basic and Diluted Earnings per
markets. share should be reported for discontinued operations.
• Entities who voluntarily choose to disclose EPS information. • An entity should report both Basic and Diluted earnings per share even if it is a Loss
per share.

Basic Earnings Per Share

• The Profit or Loss for the period attributable to ORDINARY shareholders should be Net income
Basic EPS =
the profit or loss for
OS outstanding
the period after deducting dividends on the Preference shares.
• If the preference shares are NON-CUMULATIVE – deduct the preference dividends
declared only during
• If PS is cumulative, pref div for the current year only is deducted from the
the current period.
net income, div is declared or not
• If the preference shares are CUMULATIVE – deduct the Full amount of preference
• If PS is noncumulative, pref div for the current year is deducted from net
dividends for the current
income only if there is declaration
period, whether declared or not.
• When Bonus issue or Share dividend and Share split are declared during the period,
additional shares are BLPS Note:
considered outstanding at the beginning of the earliest year or at the date of the
• If PS is cumulative, pref div is added to net loss
issuance of the related
• If PS is noncumulative, pref div is ignored
shares whichever comes later.

DILUTED EARNINGS PER SHARE

• Diluted earnings per share is computed similar to the computation of Basic earnings per share except that the profit attributable to Ordinary shareholders
and the Weighted Average number of Ordinary Shares Outstanding should be adjusted for the effects of all dilutive Potential Ordinary Shares.
• The profit for the period attributable to Ordinary shares is Increased by the After-Tax amount of Interest and dividends recognized in the period in respect of
the dilutive Potential Ordinary Shares and adjusted for any other changes in income and expense that would result from the conversion of the dilutive potential
ordinary shares.
• The Weighted Average number of Ordinary Shares Outstanding is Increased by the Weighted Average number of additional Ordinary Shares which would
have been outstanding assuming the conversion of all Dilutive Potential Ordinary shares.

Convertible Bond Payable

Potential Ordinary Shares
Net income xx
Add: Int exp on bonds payable xx
• Common examples of potential ordinary shares are CONVERTIBLE Preference shares,
Income tax xx xx
CONVERTIBLE Bonds and Options and Warrants.
Adjusted net income xx
• Potential ordinary shares should be treated as Dilutive when, and only when, their conversion
to Ordinary shares would Decrease net income per share.
OS actually outstanding xx
• Potential ordinary shares are Anti-Dilutive when their conversion to ordinary shares would
Assumed issued OS thru conversion of BP xx
Increase earnings per share or Decrease loss per share. Total OS xx
• The effects of anti-dilutive potential ordinary shares are ignored in calculating Diluted earnings
per share. Dilluted EPS = Adjusted net income/Total OS
• Potential ordinary shares in the form of share warrants and options are considered Dilutive
Note:
when the Exercise price is less than the Average Market Price.
• If convertible BP is outstanding during the year, assumed
that conversion is at beginning of the year
• Check if BP is issued during the year
• Check is BP is actually converted
Convertible Preference Share Share Option and Warrant

Net income xx Net income xx

Note:
OS actually outstanding xx Option shares xx Computation of incremental ordinary shares:
Assumed issued OS thru conversion of PS xx Multiply by total option price xx
• Options and warrants are assumed to be exercised
Total OS xx Proceeds from assumed exercise of options xx
at the beginning of the year or at the date issued
Divide by average market price xx
during the year
Assumed treasury shares xx
Dilluted EPS = Net income/Total OS • Proceeds from the exercise,of the options and

Note: warrants are assumed to be used to acquire treasury

Ordinary shares actually outstanding xx
shares at average market price.
• Net income is not reduced anymore by pref div. Incremental ordinary shares:
• The number of incremental ordinary shares is equal
• If convertible PS is outstanding during the entire Option shares xx
Assumed treasury shares (xx) xx
to the options shares minus the assumed treasury
year, assumed made at the beginning of the year
Total ordinary shares xx shares acquired
• Check if PS is issued during the year
• Check if PS is actually converted Dilluted EPS = Net income/Total OS

Illustrations:
Problem: Convertible Bond Payable
Solution:
The shareholders' equity of Ang Company Tuluyang Nanggigising was affected by the
Question I
following transactions during the current year. At the beginning of the year, there are January 1 (100,000 x 1.10) 110,000
100,000 ordinary shares outstanding. February 1 ( 21,000 x 1.10 x 11/12) 21,175
April 1 (5,000 x 1.10 x 9/12 ) (4,125)
February 1 Sold 21,000 ordinary shares in the market
July 1 (35,000 x 1.10 x 6/12 ) 19.250
April 1 Purchased 5,000 ordinary shares to be held in treasury
July 1 Sold 35.000 ordinary shares in the market Average shares - Basic EPS 146,300
July 1 Issued P1,000,000, 5-year, 10% bonds at face amount. Each 1,000
bonds is convertible into 50 ordinary shares. Basic EPS (2,926,000 / 146,300) 20.00

October 1 A 10% bonus issue was declared and distributed.

Question 2
December 31 Net income for the current year was P2,926,000. The tax rate is 30% January 1 (100,000 × 1.10) 110,000
February 1 ( 21,000 × 1.10 x 11/12) 21,175

What amount should be reported as basic eamings per share? April 1 (5,000 x 1.10 x 9/12 ) (4,125)
July 1 (35,000 × 1.10 x6/12） 19,250
Which amount should be reported as diluted earnings per share?
July 1 ( 50,000 × 1.10 x 6/12 ) 27,500
Average shares - diluted EPS 173,800
Potential ordinary shares - convertible bonds
(P1,000 bond x 50 ordinary shares) 50,000

Net income 2,926,000

Problem: Convertible Preference Share
Interest on bonds net of tax July 1 to December 31 35,000
Adjusted net income 2,961,000
At the beginning of current year, Shete Company had 2.000,000 ordinary sharees whicanding.
On July 1, the entity issued 500,000 preference shares which were convertible into 300,000 Diluted EPS (2,961,000 / 173,800) 17.04
ordinary shares.
During the year. the entity declared and paid P1,000,000 cash dividend on the ordinary shares Interest on bonds July 1 to December 31
(1.000,000 x 10% x 6/12) 50,000
and 800,000 cash dividend on the preference shares. The net income for the current year was
Interest on bonds net of tax (50,000 x 70%) 35,000
P6,500,000.

What amount should be reported as basic earnings per share?

What amount should be reported as diluted earnings per share?

Solution:

Question 2
Question 1 January 1 - Shares outstanding 2,000,000
Net income 6,500.000 July 1 - Potential ordinary shares (300,000 x 6/12) 150,000
Preference dividend (800,000) Average ordinary shares for diluted EPS 2,150,000
Net income - ordinary 5,700,000
Diluted EPS (6,500,000 / 2,150,000) 3.02
Basic EPS (5,700,000 / 2,000,000) 2.85
The effect of the convertible preference shares is increase in EPS and therefore antidilutive.
Thus, the diluted EPS should the same as basic EPS of P2.85
Problem: Option and Warrant Solution:

At the beginning of current year, Tounge Nga Company had 500,000 ordinary shares Exercise price 180
outstanding with P100 par value. Fair value of share option 20
Adjusted exercise price 200

On same date, the entity had also unexercised share options to purchase 50,000
Proceeds from exercise of options (50,000 x 200) 10,000,000
shares at P180 per share.
Ordinary shares outstanding 500,000
The fair value of the share option on grant date is P20. The average market price of Option shares 50,000
ordinary share is P250. Assumed treasury shares (10,000,000/250) (40,000)
Total ordinary shares 510,000

Net income for the current year was P15,000,000.

Diluted earnings per share (15,000,000/S 10,000) 29.41

What amount should be reported as diluted earnings per share?

PAS 33, paragraph 47A, provides that for employee share options, the exercise price shall
include the fair value of share options.

Option shares 50,000

Assumed treasury shares (40,000)
Potential ordinary shares 10,000