Tucson Ltd reported basic EPS was $5.70 for the year ended 30 June 2014.It also has the following potential ordinary shares outstanding for the entire period. $$\begin{array} { | l | r | }
\hline { \text { Type of potential ordinary shares } } & \text { Incremental EPS } \
\hline \text { Convertible preferred shares (convertible to } 10000 \text { ordinary shares) } & \$ 3.00 \
\hline \text { Convertible notes (convertible to } 30000 \text { ordinary shares) } & \$ 2.00 \
\hline \text { Executive options (exercise price } \$ 20 \text {, average share price } \$ 17 \text { ) } & \text { NA } \
\hline \text { Employee options (exercise price } \$ 15 \text {, average share price } \$ 17 \text { ) } & \text { NA } \
\hline
\end{array}$$ The share price on 30 June 2014 is $21.00. Which of the above potential ordinary shares is the most dilutive and least dilutive POS in accordance with AASB 133 Earnings per Share,respectively?

Question

Tucson Ltd reported basic EPS was $5.70 for the year ended 30 June 2014.It also has the following potential ordinary shares outstanding for the entire period. $$\begin{array} { | l | r | } 
\hline { \text { Type of potential ordinary shares } } & \text { Incremental EPS } \
\hline \text { Convertible preferred shares (convertible to } 10000 \text { ordinary shares) } & \$ 3.00 \
\hline \text { Convertible notes (convertible to } 30000 \text { ordinary shares) } & \$ 2.00 \
\hline \text { Executive options (exercise price } \$ 20 \text {, average share price } \$ 17 \text { ) } & \text { NA } \
\hline \text { Employee options (exercise price } \$ 15 \text {, average share price } \$ 17 \text { ) } & \text { NA } \
\hline
\end{array}$$ The share price on 30 June 2014 is $21.00. Which of the above potential ordinary shares is the most dilutive and least dilutive POS in accordance with AASB 133 Earnings per Share,respectively?

Quizplus · Accepted Answer

Convertible notes are the most dilutive because they have the highest incremental EPS ($2.00), indicating a greater impact on dilution. Employee options are the least dilutive because their exercise price ($15) is lower than the average share price ($17) and the share price on 30 June 2014 ($21), making them potentially dilutive, but they do not have a specified incremental EPS, suggesting their impact is less direct or quantifiable compared to the convertible instruments.

Tucson Ltd Reported Basic EPS Was $5 The Share Price on 30 June 2014 Is $21