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Commission Regulation (EC) No 2238/2004 of 29 December 2004 amending
Regulation (EC) No 1725/2003 adopting certain international
accounting standards in accordance with Regulation (EC) No 1606/2002
of the European Parliament and of the Council, as regards IASs IFRS 1,
IASs Nos 1 to 10, 12 to 17, 19 to 24, 27 to 38, 40 and 41 and SIC
Nos 1 to 7, 11 to 14, 18 to 27 and 30 to 33
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57. Contingently
issuable potential ordinary shares (other than those covered
by a contingent share agreement, such as contingently issuable
convertible instruments) are included in the diluted earnings
per share calculation as follows:
(a) an entity
determines whether the potential ordinary shares may be
assumed to be issuable on the basis of the conditions
specified for their issue in accordance with the contingent
ordinary share provisions in paragraphs 52-56; and
(b) if those
potential ordinary shares should be reflected in diluted
earnings per share, an entity determines their impact on the
calculation of diluted earnings per share by following the
provisions for options and warrants in paragraphs 45-48, the
provisions for convertible instruments in paragraphs 49-51,
the provisions for contracts that may be settled in ordinary
shares or cash in paragraphs 58-61, or other provisions, as
appropriate. However, exercise or conversion is not assumed
for the purpose of calculating diluted earnings per share
unless exercise or conversion of similar outstanding potential
ordinary shares that are not contingently issuable is assumed.
Contracts that may be settled in ordinary shares or cash
58. When an entity
has issued a contract that may be settled in ordinary shares
or cash at the entity’s option, the entity shall presume
that the contract will be settled in ordinary
shares, and the resulting potential ordinary
shares shall be included in diluted earnings per
share if the effect is dilutive.
59. When such a
contract is presented for accounting purposes as an asset or a
liability, or has an equity component and a liability
component, the entity shall adjust the numerator for any
changes in profit or loss that would have resulted during the
period if the contract had been classified wholly as an equity
instrument. That adjustment is similar to the adjustments
required in paragraph 33.
60. For contracts
that may be settled in ordinary shares or cash at the holder's
option, the more dilutive of cash settlement and share
settlement shall be used in calculating diluted earnings
per share.
61. An example of a
contract that may be settled in ordinary shares or cash is a
debt instrument that, on maturity, gives the entity the
unrestricted right to settle the principal amount in cash or
in its own ordinary shares. Another example is a written put
option that gives the holder a choice of settling in ordinary
shares or cash.
Purchased options
62. Contracts such
as purchased put options and purchased call options (ie
options held by the entity on its own ordinary shares) are not
included in the calculation of diluted earnings per share
because including them would be antidilutive. The put option
would be exercised only if the exercise price were higher than
the market price and the call option would be exercised only
if the exercise price were lower than the market price.
Written put options
63. Contracts that
require the entity to repurchase its own shares, such as
written put options and forward purchase contracts, are
reflected in the calculation of diluted earnings
per share if the effect is dilutive. If these
contracts are ‘in the money’ during the period (ie
the exercise or settlement price is above the average market
price for that period), the potential dilutive
effect on earnings per share shall be calculated
as follows:
(a) it shall be
assumed that at the beginning of the period sufficient
ordinary shares will be issued (at the average market
price during the period) to raise proceeds to satisfy
the
contract;
(b) it shall be
assumed that the proceeds from the issue are used
to
satisfy the contract (ie to buy back ordinary shares); and
(c) the
incremental ordinary shares (the difference between the
number of ordinary shares assumed issued and the number
of ordinary shares received from satisfying the
contract) shall be included in the calculation
of diluted earnings per share.
Retrospective
Adjustments
64. If the number of
ordinary or potential ordinary shares outstanding increases
as a result of a capitalisation, bonus issue or share split,
or decreases as a result of a reverse share split, the
calculation of basic and diluted earnings per
share for all periods presented shall be
adjusted retrospectively. If these changes occur after the
balance sheet date but before the financial
statements are authorised for issue, the per
share calculations for those and any prior period financial
statements presented shall be based on the new number of
shares. The fact that per share calculations reflect
such changes in the number of shares shall be
disclosed. In addition, basic and diluted earnings per share of all
periods presented shall be adjusted for the effects of
errors and adjustments resulting from changes in
accounting policies accounted for retrospectively.
65. An entity does
not restate diluted earnings per share of any prior period
presented for changes in the assumptions used in earnings per
share calculations or for the conversion of potential ordinary
shares into ordinary shares.
Presentation
66. An entity shall
present on the face of the income statement basic and diluted
earnings per share for profit or loss from continuing operations
attributable to the ordinary equity holders of the parent
entity and for profit or loss attributable to the
ordinary equity holders of the parent entity for
the period for each class of ordinary shares
that has a different right to share in profit for the period.
An entity shall present basic and diluted
earnings per share with equal prominence for all
periods presented.
67. Earnings per
share is presented for every period for which an income
statement is presented. If diluted earnings per share is
reported for at least one period, it shall be reported for all
periods presented, even if it equals basic earnings per share.
If basic and diluted earnings per share are equal, dual
presentation can be accomplished in one line on the income
statement.
68. An entity that
reports a discontinuing operation shall disclose the basic
and diluted amounts per share for the discontinuing operation
either on the face of the income statement or in the
notes to the financial statements.
69. An entity shall
present basic and diluted earnings per share, even if the
amounts are negative (ie a loss per share).
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