Pilbarra Ltd has a profit after tax of $20 220 000 for the period ended 30 June 2015.Pilbarra Ltd also has $15 000 000 of 5% cumulative preference shares.The dividends on the preference shares are not treated as expenses in the statement of comprehensive income. As at 1 July 2014 there were 12 000 000 fully paid ordinary shares issued.Pilbarra Ltd also has $6 000 000 in convertible debentures issued for the full year.It pays interest of 4.5% per annum and could be converted to 3 000 000 ordinary shares at the option of the debenture-holders.There are also 900 000 share options currently on issue with an exercise price of $4.50.The average market price for ordinary shares during the year was $6.90.In addition to the preference shares mentioned above,Pilbarra Ltd also has 1 000 000,$1.00,4% cumulative convertible preference shares that are convertible at the option of the entity.It is probable that these preference shares will be converted some time in the next period.The tax rate is 33%.What are the diluted earnings per share for Pilbarra Ltd in accordance with AASB 133?

Question

Quizplus · Accepted Answer

Diluted earnings per share (EPS) takes into account all potential ordinary shares that could possibly be converted or exercised into ordinary shares, which would dilute the earnings per share. In this case, the calculation must include the convertible debentures and the convertible preference shares, as well as the share options, in addition to the existing ordinary shares. The correct option reflects the diluted EPS after accounting for these potential conversions and exercises.

Pilbarra Ltd Has a Profit After Tax of $20 220