Daffodil Limited - Marks 11

ICAP Spring 2018 (FR162) IAS 33 Earnings per Share

Answer to Q1 has already been covered in separate

video with IAS 8 topic.
Answer to Q1: (already covered in separate video)
Daffodil Limited Share Share General Revaluation Retained
Total
Statement of changes in equity Capital premium Reserves Surplus Earnings

For the year ended 31 December 2017 Rs. m

As at 31 December 2015 1,600 1,850 49 1,430 4,929

Effect of correction of error W1 (54.69) (54.69)
As at 31 December 2015 (restated) 1,600 0 1,850 49 1,375.31 4,874.31
Final Dividend N1 (120) (120)
Right Issue N2 400 320 720
Net Profit (restated) N3 331.67 331.67
Transfer on realisation (49) 49 0
As at 31 December 2016 2,000 320 1,850 0 1,635.98 5,805.98
Final Bonus issue N4 200 (200) 0
Right Issue N5 500 250 750
Interim Bonus issue N6 405 (405) 0
Net Profit N7 660.25 660.25
Transfer to general reserves 112 (112) 0
Balance as at 31 December 2017 3,105 570 1,962 0 1,579.23 7,216.23

Notes on Calculations Rs. m

1. Final Cash Dividend 2015 Rs. 1,600m x 7.5% 120

2. Right issue @ 25%

Share Capital Rs. 1,600m / Rs. 10 = 160m x 25% x Rs. 10 400
Share premium Rs. 1,600m / Rs. 10 = 160m x 25% x Rs. 8 320

3. Net Profit 2016 [Rs. 318m given + Rs. 13.67m correction] 331.67

4. Final Bonus Dividend 2016 Rs. 2,000m x 10% 200

5. Right issue 50m shares

Share Capital 50m shares x Rs. 10 500
Share premium 50m shares x Rs. 5 250

6. Interim Bonus Dividend 2017 Rs. 2,000m + 200m + 500m = Rs. 2,700m x 15% 405

7. Net Profit 2017 [Rs. 650m given + Rs. 10.25m correction] 660.25

Correct Incorrect Profit

W1 Correction of error depreciation depreciation correction
Rs. m Rs. m Rs. m
Cost 700.00 700.00
Depreciation 2014 [700 x 25% x 11/12] (160.42)
[700 x 25% x 6/12] (87.50) (72.92)
539.58 612.50
Depreciation 2015 @25% (134.90) (153.13) 18.23
404.68 459.37 (54.69)
Depreciation 2016 @25% (101.17) (114.84) 13.67
303.51 344.53
Depreciation 2017 @25% (75.88) (86.13) 10.25
Answer to Question 2: Part (a)
Rs. 660.25m (from Ans 1) Rs. 2.26 per
Basic EPS (2017) = =
291.87m shares share

Rs. 331.67m (from Ans 1) Rs. 1.30 per

Basic EPS (2016) - restated = =
255.02m shares share

Workings
Number of Time Weighted
Period Fraction(s)
shares (m) factor average (m)
Jan to Apr 2016 [Rs. 1600m/10] 160 x 4/12 x1 x 1.10 x 1.08 x 1.15 = 72.86
Right issue 1 May 2016 [25%] 40
May to Dec 2016 200 x 8/12 x 1.10 x 1.08 x 1.15 = 182.16
Weighted average shares 2016 255.02

Jan to Mar 2017 200 x 3/12 x 1.10 x 1.08 x 1.15 = 68.31

Bonus issue 1 Apr 2017 [10%] 20
Apr to Jun 2017 220 x 3/12 x 1.08 x 1.15 = 68.31
Right issue 1 Jul 2017 50
Jul to Aug 2017 270 x 2/12 x 1.15 = 51.75
Bonus issue 1 Sep 2017 [15%] 40.5
Sep to Dec 2017 310.5 x 4/12 = 103.5
Weighted average shares 2017 291.87
Fractions
Right issue 1 May 2016 [25%] Issued at fair market price =1
Bonus issue 1 Apr 2017 [10%] 110 after / 100 before = 1.10
Right issue 1 Jul 2017 25 AcRP / 23.15 TeRP = 1.08
Bonus issue 1 Sep 2017 [15%]
115 after / 100 before = 1.15

(220m x Rs. 25) + (50m x Rs. 15) Rs. 23.15 per

Theoretical ex-right price = =
220m + 50m shares share

Answer to Question 2: Part (b)

If a class of preference shares is classified as liability (redeemable), any dividend relating to that share is
recognised as a finance cost in the statement of profit or loss.

Since it is already deducted from the profit or loss and so no further adjustment needs to be made.

If a class of preference shares is classified as equity (irredeemable), dividend must be deducted from the
profit or loss.

- For cumulative preference shares, above treatment shall be followed irrespective of declaration of
dividend.
- For non-cumulative preference shares, above treatment shall be followed only if dividend is declared.