How Do You Answer Earnings Per Share Questions in ACCA FR?
Earnings per share questions in ACCA FR test IAS 33 — the basic and diluted EPS calculations, including bonus and rights issues. Here's how to structure your answer.
Earnings per share (EPS) under IAS 33 is a regular ACCA FR topic, and it's very method-driven — get the earnings figure and the weighted-average number of shares right and the marks follow. Questions test basic EPS, the complications of bonus and rights issues, and diluted EPS. A tidy, step-by-step working is what scores.
Basic EPS
Basic EPS = earnings attributable to ordinary shareholders ÷ weighted-average number of ordinary shares. Earnings are profit after tax, after preference dividends and after the non-controlling interest's share where relevant.
Handle share issues carefully
- Full-price issue — time-apportion the new shares from the date of issue in the weighted average.
- Bonus issue — treat as if it had always existed by restating comparatives; no cash comes in.
- Rights issue — apply a bonus fraction using the theoretical ex-rights price, because a rights issue is part sale, part bonus.
Diluted EPS
Diluted EPS adjusts for potential ordinary shares — convertible instruments and options — that could dilute the EPS. Adjust earnings for the after-tax effect of any convertibles and increase the share count for the potential shares.
Practising full EPS questions and marking them against the official ACCA scheme with The 50% Club shows you exactly where your weighted-average or bonus-fraction workings lose marks — the fastest way to make EPS a dependable scorer.