MFRS 133 | CHAPTER 35 | Question 7 | Posted by: Iswan Shah

The following information relates to Roses Bhd.

Year ended 31.12.x3

The issued capital of Roses Bhd at 31 December x3 was RM20 million comprising of 40 million ordinary shares. Roses' earnings attributable to its ordinary shareholders for the year ended 31 December x3 were RM10 million, giving an earnings of 25 sen.

Year ended 31.12.x4

On 1 April x4, Roses issued 8 million ordinary shares at full market price.

On 1 October x4, a bonus issue of one new share for every four ordinary shares held was made. Earnings attributable to its ordinary shareholders for the year ended 31 December x4 were RM14.8 million.

Year ended 31.12.x5

On 1 July x5, Roses made a rights issue of two new ordinary shares at a price of RM2 each for every five ordinary shares held. The offer was fully subscribed. The market price of Roses shares immediately prior to the offer was RM4.80 each.

On 1 January x5, the directors of Roses were awarded share options for 24 million ordinary shares exercisable from 1 January x9 at RM3 per share. The average market value of Roses ordinary shares for the year ended 31 December x5 was RM4.50. Earnings attributable to its ordinary shareholders for the year ended 31 December x5 were RM16.8 million.

Year ended 31.12.x6

On 1 January x6, Roses issued RM40 million 8% convertible loan stock at par. The items of the conversion (on 1 January x9) are that for every RM100 of loan stock, 50 ordinary shares will be issued at the option of loan stockholders. The tax rate is 25%. The average market value of Roses ordinary shares for the year ended 31 December x6 was RM5. Earnings attributable to its ordinary shareholders for the year ended 31 December x6 were RM10.8 million. Assume the effective and nominal interest rates are similar.

Required:

Calculate the basic and diluted earnings per share for years x4, x5, and x6 including comparative figures (where relevant). Assume the convertibles are dilutive.