Fitzroy Ltd has the following potential ordinary shares on issue as at 30 June 2009: $$\begin{array} { | l | l | l | l | }
\hline & \begin{array} { l }
\text { Executive options } \
\text { issued 1 July 2006 }
\end{array} & \begin{array} { l }
\text { Employees options } \
\text { issued 1 July 2007 }
\end{array} & \begin{array} { l }
\text { Employees options } \
\text { issued 1 July 2008 }
\end{array} \
\hline \text { No. of options } & 100000 & 200000 & 150000 \
\hline \text { Exercise price } & \$ 2.80 & \$ 3.10 & \$ 3.30 \
\hline \text { Expiry date } & 30 \text { June 2010 } & 30 \text { June 2012 } & \text { 30 June 2013 } \
\hline
\end{array}$$ The closing price for Fitzroy Ltd shares on 30 June 2009 was $3.35 and the average share price for the period was $3.20.
Which of following statements is correct with respect to the determination of a dilutive security that is in accordance with AASB 133 Earnings per Share?

Question

Fitzroy Ltd has the following potential ordinary shares on issue as at 30 June 2009: $$\begin{array} { | l | l | l | l | } 
\hline & \begin{array} { l } 
\text { Executive options } \
\text { issued 1 July 2006 }
\end{array} & \begin{array} { l } 
\text { Employees options } \
\text { issued 1 July 2007 }
\end{array} & \begin{array} { l } 
\text { Employees options } \
\text { issued 1 July 2008 }
\end{array} \
\hline \text { No. of options } & 100000 & 200000 & 150000 \
\hline \text { Exercise price } & \$ 2.80 & \$ 3.10 & \$ 3.30 \
\hline \text { Expiry date } & 30 \text { June 2010 } & 30 \text { June 2012 } & \text { 30 June 2013 } \
\hline
\end{array}$$ The closing price for Fitzroy Ltd shares on 30 June 2009 was $3.35 and the average share price for the period was $3.20.
Which of following statements is correct with respect to the determination of a dilutive security that is in accordance with AASB 133 Earnings per Share?

Quizplus · Accepted Answer

Options are considered dilutive when the exercise price is less than the average market price of the shares. Here, the executive options (issued on 1 July 2006) with an exercise price of $2.80 and the employee options (issued on 1 July 2007) with an exercise price of $3.10 are both less than the average share price of $3.20, making them dilutive. The options issued on 1 July 2008 have an exercise price of $3.30, which is higher than the average share price, making them non-dilutive.

Fitzroy Ltd Has the Following Potential Ordinary Shares on Issue