Exercise 2.8 ★ ★ ★ DIVIDENDS, SHARE ISSUES, SHARE BUY-BACKS, OPTIONS AND MOVEMENTS IN RESERVES Hide Ltd, a company whose principal interests are in the manufacture of fi ne leather shoes and handbags, was formed on 1 January 2013. Prior to the 2016 period, Hide Ltd had issued 110 000 ordinary shares: • 95 000 €30 shares were issued for cash on 1 January 2013 • 5000 shares were exchanged on 1 February 2014 for a patent that had a fair value at date of exchange of €240 000 • 10 000 shares were issued on 13 November 2015 for €50 per share. At 1 January 2016, Hide Ltd had a balance in its retained earnings account of €750 000, while the general reserve and the asset revaluation surplus had balances of €240 000 and €180 000, respectively. The purpose of the general reserve is to refl ect the need for the company to regularly replace certain pieces of the shoe-making machinery to refl ect technological changes. During the 2016 fi nancial year, the following transactions occurred:

Feb. 15 Hide Ltd paid a €25 000 dividend that had been declared in December 2015. Liabilities for dividends are recognised when they are declared by the company. May 10 10 000 shares at €55 per share were offered to the general public. These were fully subscribed and issued on 20 June 2016. On the same date, another 15 000 shares were placed with major investors at €55 per share.

y early adopted IFRS 4 in relation to insurance. The transitional liability on initial adoption was €55 000 more than the liability recognised under the previous accounting standard. This amount was recognised directly in retained earnings. July 22 Hide Ltd repurchased 5000 shares on the open market for €56 per share. The repurchase was accounted for as treasury shares. Nov. 16 Hide Ltd declared a 1-for-20 bonus issue to shareholders on record at 1 October 2016. The general reserve was used to fund this bonus issue. Dec. 1 The company issued 100 000 options at 20c each, each option entitling the holder to acquire an ordinary share in Hide Ltd at a price of €60 per share, the options to be exercised by 31 December 2016. No options had been exercised by 31 December 2016. Dec. 31 Hide Ltd calculated that its profi t for the 2016 year was €150 000. It declared a €30 000 fi nal dividend (which was authorise for payment on that day), transferred €40 000 to the general reserve, and transferred €30 000 from the asset revaluation surplus to retained earnings.