acyfar4 bvps, eps

BVPS

It is the amount that would be received by each shareholder assuming the corporation is liquidated and the assets are realized at their carrying amounts.

a. par value per share

b. book value per share

c. fair value per share

d. original issuance per share

b

BVPS

It is the amount which the preference shareholders would normally receive upon liquidation

a. par value

b. original issuance price

c. liquidation value

d. fair value

c

BVPS

The denominator in computing book value per share is the:

a. number of shares issued

b. number of shares outstanding

c. number of shares authorized

d. weighted average number of shares outstanding

b

BVPS

In cases where there are two classes of preference shares with different dividend rates and both are participating, the ___________ dividend rate shall be used to compute basic ordinary dividends.

a. higher

b. lower

c. average

d. weighted average

b

The disclosure of earnings per share (EPS) is required for:

A. All entities.

B. Entities whose ordinary shares and potential ordinary shares are publicly traded.

C. Entities that. are in the process of issuing ordinary shares in the public market.

D. Entities whose ordinary shares and potential ordinary shares are publicly traded and entities that are in the process of issuing ordinary shares in the public market.

d

Earnings per share (EPS) disclosures (basic and diluted) are:

A. Required for all entities.

B. Encouraged for all entities.

C. Required for publicly listed entities and encouraged for non-publicly listed entities.

D. Encouraged for publicly listed entities and required for non-publicly listed entities.

c

When an entity issues both consolidated and separate financial statements, the EPS information is required:

A. Only for separate financial statements.

B. Only for consolidated financial statements.

C. For both separate and consolidated financial statements.

D. In neither set of financial statements.

b

The basic and diluted earnings per share are presented in the:

A. Statement of financial position.

B. Statement of comprehensive income.

C. Statement of changes in equity.

D. Notes to financial statements.

b

An entity that reports a discontinued operation shall present basic and diluted earnings per share for the discontinued operation:

A. only on the face of the statement of comprehensive income.

B. only in the notes to financial statements.

C. either on the face of the statement of comprehensive income or in the notes to financial statements.

D. only if management chooses to do so.

c

Computation of Basic Earnings Per Share

Which figure for earnings does EPS information use?

A. Net income attributable to ordinary equity holders and preference shareholders of the parent.

B. Income before tax.

C. Income from continuing operations.

D. Net income attributable to ordinary equity holders of the parents.

d

Basic earnings per share shall be computed using the:

A. number of ordinary shares issued as of the end of the reporting period

B. number of ordinary shares outstanding as of the end of the reporting period.

C. weighted average number of ordinary shares issued throughout the year.

D. weighted average number of ordinary shares outstanding throughout the year

d

How should a company calculate basic earnings per share?

A. By dividing the profit or loss attributable to ordinary shareholders by the number of ordinary shares issued as of the end of the reporting period

B. By dividing the profit or loss attributable to ordinary shareholders by the number of ordinary shares outstanding as of the end of the reporting period.

C. By dividing the profit or loss attributable to ordinary shareholders by the weighted average number of ordinary shares issued during the period.

D. By dividing the profit or loss attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period.

d

In computing the basic EPS, if the preference shares are cumulative and preference dividends are in arrears for three years including the current year, the amount that should be deducted as an adjustment to the numerator is the:

A. Preference dividends in arrears.

B. Annual dividends on preference shares.

C. Amount of dividend preference paid during the year.

D. Annual dividends on ordinary shares

b

In computing the basic EPS, the full amount of the required dividends on cumulative preference shares for the current period should be:

A. Ignored.

B. Deducted from net income whether declared or not.

C. Added to net income whether declared or not.

D. Deducted from net income only when declared.

E. Added to net income only when declared.

b

In computing the basic EPS, the amount of dividends on non-cumulative preference shares should be:

A. Ignored

B. Deducted from net income whether declared or not.

C. Added to net income whether declared or not.

D. Deducted from net income only when declared.

E. Added to net income only when declared.

d

In computing EPS, preferred dividends are not deducted from net income when:

A. The preference share is non-cumulative and dividends are not declared

B. The preference share is non-cumulative and dividends are declared.

C. The preference share is cumulative and dividends are declared.

D. The preference share is cumulative and dividends are not declared.

a

In computing basic loss per share (LPS), the full amount of the required dividends on cumulative preference shares for the period should be:

A. Ignored.

B. Deducted from net loss whether declared or not.

C. Added to net loss whether declared or not.

D. Deducted from net loss only when declared.

E. Added to net loss only when declared

c

In computing basic loss per share (LPS), the amount of dividends on non-cumulative preference shares should be:

A. Ignored.

B. Deducted from net loss whether declared or not

C. Added to net loss whether declared or not.

D. Deducted from net loss only when declared.

E. Added to net loss only when declared:

e

Which of the following statements is/are correct regarding the computation of weighted average number of ordinary shares?

A. Ordinary shares are included in the weighted average number of shares from the date consideration is receivable.

B. Ordinary shares issued in exchange for cash are included when cash is receivable.

C. Ordinary shares issued as a result of the conversion of a debt instrument to ordinary shares are included from the date of conversion.

D. Subscribed ordinary shares are included in EPS under IFRS to the extent that they are entitled to dividends.

E. All of the foregoing statements are correct.

e

When are ordinary shares issued as a result of the conversion of a debt instrument included in the computation of weighted average number of shares?

A. The date when cash is receivable

B. The date when dividends are reinvested

C. The date when the debt instrument is converted into ordinary shares.

D A or B, or whatever comes first.

c

Ordinary shares issued as part of a business combination are included in the EPS calculation from:

A. the beginning of the accounting period.

B. the date of acquisition.

C. the end of the accounting period.

D. the mid-year.

b

Shares which are issued to settle a liability are included in the EPS calculation from:

A. Date of the contract for services.

B. Halfway through the rendering of services.

C. The completion of services.

D. The settlement date.

c

Contingently issuable shares are treated as outstanding and are included in the computation of basic earnings per share:

A. The date the contract is entered into.

B. The date that the new shares are registered.

C. From the date when all necessary conditions are satisfied.

D. Both B and C.

c

Which of the following is the correct treatment of a share dividend issued on April 1 when determining the weighted average number of ordinary shares outstanding for EPS computation purposes?

A. The share dividend should be weighted by the length of time that the additional shares are outstanding during the period.

B. The share dividend should be weighted as if the additional shares were issued at the beginning of the year.

C. The share dividend should not be considered in the computation of EPS if it is only less than 20%.

D. The share dividend should not be considered in the computation of EPS under all circumstances

b

In the computation of weighted average number of shares outstanding when there is a share split, the additional shares are:

A. Weighted by the number of days outstanding.

B. Weighted by the number-of months outstanding.

C. Considered outstanding at the beginning of the current period

D. Considered outstanding at the beginning of the earliest period presented

d

If bonus issue and/or share split occurs between the end of the current year and the date the financial statements are authorized for release:

A. The EPS for both the current and the previous year are adjusted

B. The EPS for the current year only is adjusted.

C. No adjustment is made to EPS

D. Only a note disclosure is required.

a

Which of the following requires restating earnings per share for all prior years presented?

A. Issuance of share options to employees

B. Share dividends and share splits

C. The conversion of convertible bonds

D. Isuance of convertible preference shares.

b

Dilution of EPS is defined as:

A. decrease in EPS when any financial instrument is converted to any form of share capital.

B. increase in EPS, when any financial instrument is converted to any form of share capital.

C. decrease in EPS when convertible instruments are converted to ordinary shares.

D. increase in EPS when convertible instruments are converted to ordinary shares.

c

Dilutive potential ordinary shares are deemed to have been converted into ordinary shares if and only if the following conditions are met:

A. The date of the issue of potential ordinary shares.

B. At the start of the period

C. At the end of the period.

D. At the start of the period or, if later, the date of the issue of potential ordinary shares.

d

Anti-dilutive securities:

A. Are those whose inclusion in EPS computation would cause basic EPS to exceed diluted EPS.

B. Should be included in the computation of diluted EPS but not basic EPS

C. Include share options and warrants whose exercise price is less than the average market price.

D. Should be disregarded in all EPS computations.

d

Dilutive securities shall be used in the computation of:

A. basic earnings per share only.

B. diluted earnings per share only.

C. basic and diluted earnings per share.

D. none of these.

b

In determining the diluted earnings per share, which of the following should not be considered?

A. The weighted average number of ordinary shares outstanding

B. The amount of dividends declared on cumulative preference shares.

C. The amount of cash dividends declared on ordinary shares.

D. The number of ordinary shares resulting from the assumed conversion of bonds payable outstanding.

c

***In computing diluted (basic) EPS, dividends on convertible, cumulative preference shares should be:

A. Ignored.

B. Deducted from net income, whether declared or not.

C. Added to net income, whether declared or not.

D. Deducted from net income only when declared.

a

***In computing diluted (basic) EPS, dividends on non-convertible cumulative preference shares should be:

A. Ignored

B. Deducted from net income, whether declared or not.

C. Added to net income, whether declared or not.

D. Deducted from net income only when declared.

b

When computing diluted (basic?) EPS, convertible preference shares are:

A. Assumed converted only if they are dilutive.

B. Assumed converted only if they are antidilutive.

C. Assumed converted whether they are dilutive or antidilutive.

D. Ignored.

a

An entity has already computed the basic EPS. In determining the diluted EPS, the annual dividend on convertible cumulative preference share which is dilutive should be:

A. Added back to the numerator of basic EPS whether declared or not.

B. Deducted from the numerator of basic EPS whether declared or not.

C. Added back to the numerator of basic EPS only when declared.

D. Deducted from the numerator of basic EPS only when declared.

a

The "as if" method of computing diluted EPS assumes conversion of convertible bonds at the:

A Beginning of the earliest period reported regardless of the time of issuance.

B. Beginning of the earliest period reported or at the time of issuance, if later.

C. Time of actual issuance.

D. End of the earliest period reported or at the time of issuance, if later.

b

When a convertible bond is incorporated in the computation of diluted EPS:

A. After-tax interest expense is subtracted from income and weighted average shares are decreased.

B. After-tax interest expense is added back to income and weighted average shares are decreased.

C. After-tax interest expense is subtracted from income and weighted average shares are increased.

D. After-tax interest expense is added back to income and weighted average shares are increased.

d

When computing diluted EPS, convertible bonds are:

A. Assumed converted only if they are dilutive.

B. Assumed converted only if they are antidilutive

C. Assumed converted whether they are dilutive or antidilutive.

D. Ignored.

a

When dilutive convertible bonds are the only potential ordinary shares:

A. Diluted EPS will be greater if the bonds are actually converted than not converted

B. Diluted EPS will be smaller if the bonds are actually converted than not converted.

C. Diluted EPS will be the same whether or not the bonds are converted.

D. The effect of conversion on diluted EPS cannot be determined without additional information.

c

When computing diluted EPS, share options and warrants are:

A. Recognized only if they are dilutive.

B. recognized only if they are antidilutive

C. Recognized whether they are dilutive or antidilutive.

D, recognized only if they were exercised.

E. ignored.

a

Options and warrants are dilutive if:

A. The exercise price is lower than the average market price

B. The exercise price is higher than the average market price

C. The exercise price is lower than the market price at the end of the reporting period.

D. The exercise price is higher than the market price at the end of the reporting D. period.

a

Under the treasury share method, the number of potential ordinary shares is equal to:

A. the option shares.

B. the assumed treasury shares.

C. the difference between option shares and assumed treasury shares

D. option shares actually issued during the year.

c

When applying the treasury share method for diluted EPS, the market price of the ordinary share used for the assumed acquisition of treasury shares is the:

A. Market price at the beginning of the year.

B. Market price at the end of the year.

C. Average market price during the year.

D. Market price at the actual date of acquiring treasury shares.

c

If a share option is converted on April 30:

A. The potential ordinary shares are included in diluted EPS up to April 30, and in basic EPS from the date converted to the year-end, both weighted accordingly.

B. The ordinary shares are not included in basic EPS.

C. The ordinary shares are not included in diluted EPS.

D. The effects of the share option are included only in previous year's EPS calculation.

a

In the diluted earnings per share computation, if the exercise price of the options or warrants exceeds the average share price, the computation would (holders would not be inclined to exercise):

A. fairly present the diluted earnings per share.

B. fairly present the maximum potential dilution of diluted earnings per share.

C. reflect the excess of the number of shares assumed issued over the number of shares assumed reacquired as the potential dilution of earnings per share.

D. be antidilutive.

d

When there are multiple dilutive convertible securities, the one that should be used first to calculate diluted EPS is the security with the:

A . Largest earnings adjustment.

B. Smallest earnings adjustment.

C. Largest incremental EPS

D. Smallest incremental EPS

d

In calculating whether potential ordinary shares are dilutive, the income figure used as the control number is:

A. Pre-tax income from continuing operations.

B. After-tax income from continuing operations.

C. Net income.

D. Total comprehensive income.

b

For a company having several different issues of convertible securities, IAS 33 requires selection of the combination of securities producing:

A. The lowest possible earnings per share.

B. The highest possible earnings per share.

C. The earnings per share figure midway between the lowest possible and the highest possible earnings per share.

D. Any earnings per share figure between the lowest possible and the highest possible earnings per share.

a

Contingently issuable shares are treated as outstanding and are included in the computation of basic earnings per share:

C. From the date when all necessary conditions are satisfied.

The shares that may or may not be issued depending on certain conditions are considered as part of the outstanding shares only when all necessary conditions are met. In other words, when the events relating to the conditions have occurred.

t

In a bonus issue or share split, OS are issued to existing shareholders for no additional compensation.

Therefore, the number of OS outstanding has increased without an increase in resources.

The number of OS outstanding before the event is adjusted for the proportionate change in the number of OS as if the event had occurred at the beginning of the earliest period presented.

t

If the number of ordinary or potential ordinary shares outstanding changes as a result of a bonus issue of share split, the calculation of basic and diluted earnings per share for all periods presented shall be adjusted prospectively.

f

Diluted earnings per share is a more accurate measure of a company’s profitability because it considers the potential dilution that could occur if all of the dilutive securities were exercised or converted into common shares.

t

Dividends on convertible preference shares are IGNORED since these are assumed to be converted to OS in the computation of diluted EPS.

t

Non-convertible cumulative PS are NOT potential OS.

Hence, dividends on these PS are deducted from net income, whether declared or not.

t

When the basic EPS is already computed, the dividends on convertible cumulative PS are already deducted from the net income attributable to ordinary shareholders.

In determining the diluted EPS, these dividends must be added back to remove its effect because of the concept of assumed conversion of potential OS.

t

Options and warrants are antidilutive when the exercise price is lower than the average market price.

The holders will be motivated to exercise their options and/or warrants if they can purchase the shares at a lower price.

f

*Earnings per share shall be computed on the basis of

A. The number of shares outstanding at the end of the year

B. A weighted average of the number of shares outstanding during the year regardless of the extent of fluctuations

C. A weighted average of the number of shares outstanding during the year except that mirror fluctuations in the number of shares may be disregarded

D. The number of shares outstanding at the middle of year

c

*Earnings per share shall be reported for all of the following except

A. Continuing operations

B. Discontinued operations

C. Net income

D. Net cash provided by operating activities

d

*Earnings per share shall be calculated before accounting for which of the following

A. Preference dividend for the period

B. Ordinary dividend

C. Taxation

D. Minority interest

b

Which figure for earnings does EPS information use?

A. Profit attributable to ordinary equity holders and preference shareholders of the parent

B. Profit before taxation

C. Profit from operations

D. Profit attributable to ordinary equity holders of the parent

d

*When an entity makes a bonus issue, share split, stock dividend or a rights issue

a. The previous year's EPS is not adjusted for the issue.

b. The previous year's EPS is adjusted for the issue.

c. Only a note of the effect on the previous year's EPS is made.

d. Only the diluted EPS for the previous year is adjusted.

b

*If a new issue of shares for cash is made between the year-end and the date that the financial statements are authorized for issue

A. The EPS for both the current and the previous year are adjusted

B. The EPS for the current year only is adjusted

C. No adjustment is made to EPS

D. Diluted EPS only is adjusted

c

The weighted average number of shares outstanding during the period for all periods other than the conversion of potential ordinary shares should be adjusted for

a. Any change in the number of ordinary shares without a change in resources.

b. Any prior period adjustment.

c. Any new issue of shares for cash.

d. Any convertible instruments settled in cash.

a

Shares which are to be issued upon the conversion of a mandatorily convertible instrument are included in the calculation of basic earnings per share from

a. The date of the contract for the shares

b. Halfway through the period

c. The date of conversion

d. The issue of the share certificate

a

Under IFS, where ordinary shares are issued but not paid, the ordinary shares are treated in EPS

a. In the same way as fully paid ordinary shares.

b. As a fraction of an ordinary share to the extent that the shares are entitled to participate in dividends.

c. In the same way as warrants or options

d. Are ignored.

b

BVPS:

Which of the following shareholder rights is most commonly enhanced in an issue of preference shares?

a. The right to vote for the Board of Directors

b. The right to maintain one's proportional interest

c. The right to receive the full cash dividend before dividends are paid to other classes of share capital

d. The right to vote on major corporate issues

c

BVPS:

Preference shares participate ratably with the ordinary shareholders in any profit distribution beyond the prescribed preference rate.

a. Cumulative feature

b. Participating feature

c. Callable feature

d. Redeemable feature

b

BVPS:

Which feature of preference share would most likely be opposed by ordinary shareholders

a. Convertible

b. Callable

c. Redeemable

d. Participating

d

BVPS:

*Noncumulative preference share dividends in arrears

a. Are not paid and not disclosed

b. Must be paid before any other cash dividends can be distributed

c. Are disclosed as liability until paid

d. Are paid to preference shareholders if sufficient funds remain after payment of ordinary dividend

a

How should cumulative preference shared dividends in arrears be reported?

a. Note disclosure

b. Increase in shareholders' equity

c. Increase in current liabilities

d. Increase in noncurrent liabilities

a

BVPS:

In the absence of a liquidation value, the PS holders shall receive an amount equal to the par or stated value.

However, if there is a deficit, the PS holders would share on a prorata basis with the OS holders.

The PS may have a call price but this is ignored in the computation for the BVPS.

The call price is the amount paid to PS holders upon redemption of PS during the lifetime of the corporation.

t

BVPS:

1. Preference as to assets

The PS holders are entitled to payment, not only for the liquidation value, but also for dividends in arrears.

2. Preference as to dividends

This does not mean that PS holders have an absolute right to dividends.

The preference simply means that if dividends are declared, PS holders have the right to receive dividends first before the OS holders are paid.

IN THE ABSENCE OF ANY STATEMENT TO THE CONTRARY, THE PS HAS A PREFERENCE AS TO DIVIDENDS (e.g., noncumulative, cumulative, participating, nonparticipating).

t

*The calculation of diluted EPS assumes that share options were exercised and that the proceeds were used to

a. Buy ordinary shares as an investment

b. Retire preference shares

C. Buy treasury shares

d. Increase net income

c

Options and warrants are dilutive if

a. The exercise price is lower than the average market price.

b. The exercise price is higher than the average market price.

c. The exercise price is equal to the average market price.

d. The option shares represent 20% of ordinary shares.

a

*In applying the treasury share method of computing diluted earnings per share, when is it appropriate to use the average market price of ordinary share during the year as the assumed repurchase price?

a. Always

b. When the average market price is higher than the exercise price

c. Never

d. When the average market price is lower than the exercise price

b

Under the treasury share method, the number of potential ordinary shares is equal to

a. Option shares

b. Option shares minus assumed treasury shares

c. Assumed treasury shares

d. Option shares actually issued during the year

b

*All of the following must be disclosed in relation to earnings per share, except

a. Forecast earnings per share for the following year.

b. Instruments that could potentially dilute basic earnings per share in the future but not included in the diluted EPS because they are antidilutive in the current period

c. The weighted average number of ordinary shares used.

d. The earnings figures used in calculating EPS.

a

Dilution of EPS is defined as

a. Decrease in earnings per share when any financial instrument is converted to any form of share capital

b. Decrease in share capital.

c. Decrease in earnings per share when convertible instruments are converted to ordinary shares.

d. Decrease in earnings per share when share capital is converted to debt capital.

c

The nature of diluted earnings per share involving adjustment for share options can be described as

a. Historical because earnings are historical

b. Historical because it indicates an entity's valuation

c. Proforma because it indicates potential changes in number of shares

d. Proforma because it indicates potential changes in earnings

c