IAS 33:

1. Anti-dilution is:
a. An increase in earnings per share when ordinary shares are converted to convertible
instruments
b. A decrease in earnings per share when convertible instruments are converted to ordinary
shares
c. An increase in earnings per share when convertible instruments are converted to ordinary
shares
d. An decrease in earnings per share when ordinary shares are converted to convertible
instruments

2. Put options on ordinary shares are contracts that give the holder the right to:
a. Buy or sell ordinary shares
b. Sell ordinary shares
c. Buy ordinary shares
d. Buy put option on ordinary shares

3. Basic earnings per share shall be calculated by dividing the numerator by the number of
ordinary shares outstanding (the denominator):
a. At the start of the period
b. At the end of the period
c. The weighted-average during the period
d. At the date of the capitalisation issue

4. In a capitalisation issue, the number of shares, outstanding before the event, is adjusted for
the proportionate change in the number of shares outstanding:
a. At the start of the current periodd
b. As if the event had occurred at the start of the earliest period presented
c. At the end of the current period
d. At the date of the capitalisation issue

5. A share consolidation is combined with a special dividend. The weighted-average number of

shares outstanding for the period in which the combined transaction takes place, is adjusted
for the reduction in the number of shares:
a. At the date the special dividend is recognised
b. As if the event had occurred at the start of the earliest period presented
c. At the end of the current period
d. At the start of the current period

6. Dilutive potential shares shall be deemed to have been converted into shares:
a. At the start of the period or, if later, the date of the issue of the potential shares
b. At the end of the period
c. At the start of the period
d. The date of the issue of the potential shares

7. Options and warrants are dilutive, when they would result in the issue of shares for:
a. Less than the average market price of shares during the period
b. The average market price of shares during the period
c. More than the average market price of shares during the period.
d. The average market price of shares during the period

8. Staff share options with fixed terms are treated as options in the calculation of diluted
earnings per share. They are treated as outstanding:
a. At the start of the earliest period presented
b. On the grant date
c. On the exercise date
d. At the end of the earliest period presented

9. Contingently-issuable shares: If the conditions are not met when the contingency period
expires, restatement of previous periods:
a. Is required
b. Is optional
c. Is not permitted
d. Is permitted

10. Contracts, such as purchased put options and purchased call options (i.e. options held by the
undertaking on its own shares) are included:
a. Neither Basic EPS calculation nor Diluted EPS calculation
b. Diluted earnings per share calculation
c. Basic earnings per share calculation
d. Basic EPS calculation and Diluted EPS calculation

11.All companies which comply with international standards must present EPS figures in the
statement of comprehensive income. True or False
False(IAS33 applies to public companies only.)

12.A company's issued share capital throughout an accounting period consists of 500,000
ordinary shares of 20p and 80,000 preference shares of £1. Profit after tax for the period is
£320,000 and the preference dividend is £8,000. Basic EPS for the period is:
a. 62.4p (Basic EPS = (£320,000 – £8,000) /500,000 = 62.4p)
b. 64p c. 55.2p d. £3.12

13. On 1 January 20X5, a company's issued share capital consisted of 120,000 ordinary shares of
£1. On 1 May 20X5, the company issued another 30,000 ordinary shares and on 1 July 20X5 the
company issued a further 50,000 shares. Both issues were made at full market price. The
weighted average number of shares outstanding during the year to 31 December 20X5 was:
a. 165,000 share b. 160,000 share, c. 156,667 share d. 175,000 share
(Weighted average = (120,000 × 4/12) + (150,000 × 2/12) + (200,000 × 6/12) = 165,000 share)
14. A company's profit after tax for the year to 30 June 2016 was £1m. The company's issued
share capital at 1 July 2015 consisted of 2,400,000 ordinary shares of 50p each. A further
300,000 shares were issued at full market price on 1 September 2015. Basic EPS for the year is:
a. 75.5p b. 37.7p c. 39.2p d. 78.4p

15. When calculating earnings per share, a bonus issue made during the current accounting
period is treated as if it had been made at the beginning of the earliest period for which
comparative figures are presented. True or False? (True)

16. A company's profit after tax for the year to 31 December 2015 was £150,000. The
comparative figure for 2014 was £135,000. The company's issued share capital at 1 January 2014
consisted of 240,000 ordinary shares. A 1 for 4 bonus issue was made on 1 July 2015. There
were no other share issues in either year. Basic EPS for 2015 and restated basic EPS for 2014
are:
a. 55.6p and 50p b.50p and 45p c. 50p and 56.25p d. 55.6p and 56.25p
(Basic EPS for 2015 is £150,000/300,000 = 50p Restated basic EPS for 2014 is
£135,000/300,000 = 45p)

17. In February 2016, a company makes a 1 for 10 rights issue at 70p per share. The market
value of the company's shares just before this rights issue was £1.25 per share. The theoretical
market value per share after the rights issue has been made is:
a. 70p ; b. £1.32; c. £1.2 d. £1.14
(Before the rights issue, every ten shares had a market value of £12.50. After the rights issue,
every eleven shares should have a market value of (£12.50 + 70p) = £13.20. So the market value
per share after the rights issue should be £13.20/11 = £1.20)

18. A company's profit after tax for the year to 31 December 20X5 was £275,000. The
company's issued share capital on 1 January 20X5 consisted of 350,000 ordinary shares. On 1
April 2015, the company made a 1 for 7 rights issue at £1 per share. The market value of the
company's shares just before this rights issue was £1.40 per share. Basic EPS for 20X5 is:
a. 70.1p b. 75.8p c. 68.75p d. 70.4p
(Before the rights issue, 350,000 shares had a market value of £490,000 (350,000 × £1.40). The
rights issue was of 50,000 shares and raised £50,000. So, after the rights issue, a total of 400,000
shares should have a market value of £540,000 (£490,000 + £50,000). So the market value per
share after the rights issue should be £540,000/400,000 = £1.35. If a bonus issue had caused this
fall in market value, the number of shares outstanding after the bonus issue would have been
(£490,000/£1.35) = 362,963. So the rights issue can be split into 12,963 bonus shares and 37,037
shares issued at full price. Weighted average number of shares is (362,963 × 3/12) + (400,000 ×
9/12) =390,741 so basic EPS is £275,000/390,741 = 70.4p)

19. Which of the following should be adjusted when calculating dilutive EPS?
a. Finance charges payable on convertible debt
b. Preference dividends payable on convertible preference shares
c. Payments to non-discretionary employee profit sharing plans
d. All of these
All of these. They will be affected should the convertible instruments become ordinary shares. Even
the employee profit sharing plan may be affected by the conversion of the instruments to equity.

20. A potential ordinary share is…

a. An ordinary share, which has not been paid fo
b. A preferential share
c. A financial instrument which may entitle the holder to ordinary shares
d. An authorised, but not issued ordinary share

21.Platinum Limited had an after tax profit of $400,000 for the year. $80,000 of this was earned
from the once off sale of machinery.
During the period it paid dividends to the ordinary shareholders of $100,000 and $50,000 to
preference shareholders.
It had 1,000,000 ordinary shares in issue for the entire period.
The basic earnings per share for Platinum Limited in the period is…
a. 33c b. 32c c.35c d.17c

22.Basic EPS is calculated using the net profit of loss for the period attributable to…
a. Ordinary shareholders
b. Preferred shareholders
c. Debenture holders
d. Secured creditors

23.Which of the following is not an example of a potential ordinary share?

a. Standard preferred share
b. Convertible preferred share
c. Share warrants
d. Convertible debt

Standard preferred shares are usually not convertible to ordinary shares. \

Examples of potential ordinary shares are:

• convertible debt
• convertible preferred shares
• share warrants
• share options
• share rights
• employee stock purchase plans
• contractual rights to purchase shares
• contingent issuance contracts or agreements (such as those arising in a business combination)

24.A contract which gives rise to a financial asset in one entity and a financial liability in another
entity is called:
a. An equity instrument
b. A financial instrument
c. A sale agreement
d. A derivative

25. A contract that evidences a residual interest in the assets of an entity after deducting all of its
liabilities is called…
a. An equity instrument
b. A financial instrument
c. Secured loan
d. Mortgage

26.Ordinary shares outstanding during the period are

a. Based on the outstanding shares in the previous period
b. Based on the outstanding shares at the start of the period
c. Based on the outstanding shares at the end of the period
d. The weighted average number of shares outstanding during the period

27.Shares are usually included in the weighted average number of shares from the date
consideration is…
a. Received b. Receivable c. Discussed d. Agreed

28.Which of the following events requires no adjustment to the prior period’s EPS calculations?
a. Bonus issue of shares
b. Exercise of stock warrant
c. Share split
d. Reverse share split

29.Diluted EPS shows

a. The expected EPS if all securities with an equity interest, exercise those interests
b. The expected EPS if the share price falls
c. The expected EPS if all loans are discharged
d. The expected EPS if equity options and warrants are redeemed

30. Where should basic EPS be presented in the financial statements?

a. Statement of Comprehensive Income
b. Statement of Financial Position
c. Statement of Changes in Equity
d. Notes to the financial statements