Cadbury Schweppes manufactures beverages and confectionary candies. Because the company is based in the United Kingdom, it is not required to comply with U.S.GAAP. However, the standards relating to EPS under which Cadbury Schweppes prepared its 2004 annual report are similar to the requirements of FASB Statement No. 128.
Earnings per Ordinary Share
(a) Basic Earnings per Share (€œEPS€)
Basic EPS is calculated on the weighted average of 2,027 million shares (2003: 2,013 million shares; 2002: 2,003 million shares) in issue during the year.
(b) Underlying EPS
The reconciliation between Basic EPS and underlying EPS, and between the earnings figures used in calculating them, is as follows:

(c) Diluted EPS
Diluted EPS has been calculated based on the Basic EPS Earnings amount above. A reconciliation between the shares used in calculating Basic and Diluted EPS is as follows:

Share options not included in the diluted EPS calculation because they were non-dilutive in the period totaled 35 million in 2004 (2003: 77 million; 2002: 41 million), as the exercise price of these share options was below the average share price for the relevant year.
Review Cadbury Schweppes€™ note disclosures and answer the following questions.
1. How does Cadbury Schweppes€™ €œunderlying EPS€ differ from basic EPS? From diluted EPS?
2. For each year in the 3-year period 2002€“2004, compute the percentage of total stock options that weredilutive.

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Earnings EPS 2003 pence pence pence 2004 2003 2002 fm 2004 2002 fm Ém Earnings/Basic EPS Goodwill/intangible amortisation. Operating exceptional items Non-operating exceptional items 431.0 138.9 714 366.3 548. 63.5 53.0 21.3 6.8 8.4 4.8 (.7) (09) 32.6 6.4 11.1 0.3 320 27.4 3.2 2.6 (0.6) 129.3 223.7 661.3 643.4 640. 32.0 2004 2003 2002 miion million million Average shares used in Basic EPS calculation2.027 2,013 2.003 Dilutive share options outstanding Shares used in Diluted EPS calculation 14 204 2019 20 14 2.017 2,041