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REVIEW QUESTIONS
1. Which statement is incorrect regarding the objective of c. If basic and diluted earnings per share are equal,
PAS 33? dual presentation can be accomplished in one line
a. The objective is to prescribe principles for the in the statement of comprehensive income.
determination and presentation of earnings per d. None of the above.
share, so as to improve performance comparisons
between different entities in the same reporting 6. If an entity presents items of profit or loss in a
period and between different reporting periods for separate statement of profit or loss, it presents
the same entity. earnings per share
b. Even though earnings per share data have a. Only in the statement of profit or loss.
limitations because of the different accounting b. Only in the statement of profit or loss and other
policies that may be used for determining comprehensive income.
earnings, a consistently determined denominator c. Only in the statement of changes in equity.
enhances financial reporting. d. Only in the notes to the financial statements.
c. The focus of PAS 33 is on the numerator of the
earnings per share calculation. 7. EPS should always be shown separately for
d. None of the above. a. Net income and gross profit.
b. Net income and pretax income.
2. EPS disclosures are c. Income from continuing operations.
a. Encouraged for all entities d. Discontinued operations and prior period
b. Required for all entities adjustments.
c. Encouraged for public entities and required for
nonpublic enterprises. 8. Which statement is incorrect regarding basic EPS?
d. Required for public entities and encouraged for a. An entity shall calculate basic earnings per share
nonpublic enterprises. amounts for profit or loss attributable to ordinary
equity holders of the parent entity and, if
3. Dilution is presented, profit or loss from continuing operations
a. An increase in earnings per share resulting from attributable to those equity holders.
the assumption that convertible instruments are b. Basic earnings per share shall be calculated by
converted, that options or warrants are exercised, dividing profit or loss attributable to ordinary
or that ordinary shares are issued upon the equity holders of the parent entity (the numerator)
satisfaction of specified conditions. by the number of ordinary shares outstanding (the
b. A reduction in loss per share resulting from the denominator) at the end of the period.
assumption that convertible instruments are c. The objective of basic earnings per share
converted, that options or warrants are exercised, information is to provide a measure of the
or that ordinary shares are issued upon the interests of each ordinary share of a parent entity
satisfaction of specified conditions. in the performance of the entity over the reporting
c. Either a or b. period.
d. Neither a nor b. d. None of the above.
4. Which statement is incorrect regarding requirement to 9. Earnings per share is calculated before accounting for
present EPS? which of the following items?
a. An entity whose securities are publicly traded (or a. Preference dividend for the period
that is in process of public issuance) must present, b. Ordinary dividend
in the statement of comprehensive income, basic c. Taxation
and diluted earnings per share. d. Minority interest
b. Basic and diluted earnings per share must be
presented with equal prominence for all periods 10. For the purpose of calculating basic earnings per
presented. share, the amounts attributable to ordinary equity
c. Basic and diluted EPS must be presented even if holders of the parent entity shall be adjusted for the
the amounts are negative. after-tax amounts of preference dividends. The after-
d. If an entity reports a discontinued operation, basic tax amount of preference dividends that is deducted
and diluted amounts per share must be disclosed from profit or loss does not include:
for the discontinued operation on the face of the a. The after-tax amount of any preference dividends
income statement. on non-cumulative preference shares declared in
respect of the period.
5. Which statement is incorrect regarding presentation of b. The after-tax amount of the preference dividends
basic and diluted EPS? for cumulative preference shares required for the
a. Earnings per share is presented for every period period, whether or not the dividends have been
for which a statement of comprehensive income is declared.
presented. c. The amount of any preference dividends for
b. If diluted earnings per share is reported for at least cumulative preference shares paid or declared
one period, it shall be reported for all periods during the current period in respect of previous
presented, even if it equals basic earnings per periods.
share. d. None of the above.
11. Which statement is incorrect regarding increasing rate c. The ordinary shares are not included in the basic
preference shares? EPS but are included in diluted EPS.
a. Increasing rate preference shares provide for a low d. The effects of the stock option are included only in
initial dividend to compensate an entity for selling previous year's EPS calculation.
the preference shares at a discount.
b. Increasing rate preference shares provide for an 17. Entity A has an ordinary "A" class, non- voting share,
above-market dividend in later periods to which is entitled to a fixed dividend of 6% per annum.
compensate investors for purchasing preference The "A" class ordinary share will
shares at a premium. a. Be included in the "per share" calculation after
c. Any original issue discount or premium on adjustment for the fixed dividend.
increasing rate preference shares is amortized to b. Be included in the "per share" calculation for EPS
profit or loss using the effective interest method. without adjustment for the fixed dividend.
d. Any original issue discount or premium on c. Not be included in the "per share" calculation for
increasing rate preference shares is treated as a EPS.
preference dividend for the purposes of calculating d. Be included in the calculation of diluted EPS.
earnings per share.
18. The weighted average number of ordinary shares
12. The following are deducted in calculating profit or loss outstanding during the period and for all periods
attributable to ordinary equity holders of the parent, presented shall be adjusted for events that have
except changed the number of ordinary shares outstanding
a. The after-tax amount of preference dividends. without a corresponding change in resources.
b. The excess of the fair value of the consideration Examples include, except
paid to the preference shareholders over the a. Capitalization or bonus issue (sometimes referred
carrying amount of the repurchased preference to as a stock dividend)
shares. b. Bonus element in a rights issue to existing
c. The excess of the fair value of the ordinary shares shareholders
or other consideration paid over the fair value of c. Share split
the ordinary shares issuable under the original d. Conversion of potential ordinary shares
conversion terms in relation to induced early
conversion of convertible preference shares. 19. Potential ordinary shares do not include
d. Any excess of the carrying amount of preference a. Share warrants and options
shares over the fair value of the consideration paid b. Employee plans that allow employees to receive
to settle them. common shares as part of their renumeration and
other share purchase plans
13. Which of the following is incorrect regarding inclusion c. Shares which would be issued upon the satisfaction
of shares in the weighted average number of shares? of certain conditions resulting from contractual
a. Ordinary shares issued as a result of the arrangements, such as the purchase of a business
conversion of a debt instrument to ordinary shares or other assets
are included from the date that interest ceases to d. Debt or equity instruments, including preference
accrue. shares, that are not convertible into ordinary
b. Ordinary shares issued in exchange for the shares
settlement of a liability of the entity are included
from the settlement date. 20. When an enterprise makes a bonus issue/stock
c. Ordinary shares issued for the rendering of split/stock dividend or a rights issue, then
services to the entity are included as the services a. The previous year's EPS is not adjusted for the
are rendered. issue.
d. Ordinary shares issued in exchange for cash are b. The previous year's EPS is adjusted for the issue.
included when cash is received. c. Only a note of the effect on the previous year's
EPS is made.
14. Ordinary shares issued as part of a business d. Only the diluted EPS for the previous year is
combination are included in the EPS calculation in the adjusted.
case of the "purchase" method from
a. The beginning of the accounting period. 21. If a bonus issue occurs between the year-end and the
b. The date of acquisition date that the financial statements are authorized, then
c. The end of the accounting period. a. EPS both for the current and the previous year are
d. The midpoint of the accounting year. adjusted
b. EPS for the current year only is adjusted
15. At what point are dilutive potential shares deemed to c. No adjustment is made to EPS
have been converted into ordinary shares? d. Diluted EPS only is adjusted
a. At the start of the period.
b. At the end of the period. 22. In determining earnings per share, interest expense,
c. The date of the issue of the dilutive shares. net of applicable income taxes, on convertible debt
d. At the start of the period or, if later, the date of which is dilutive should be
the issue of the potential shares. a. Ignored for diluted earnings per share.
b. Added back to net income for diluted earnings per
16. If a stock option is converted on March 31, 2014, then share.
a. The potential ordinary shares (stock option) are c. Deducted from net income for diluted earnings per
included in diluted EPS up to March 31, 2014, and share.
in basic EPS from the date converted to the year- d. None of the above.
end (both weighted accordingly).
b. The ordinary shares are not included in the diluted
EPS calculation but are included in basic EPS. - now do the DIY drill -