ABC Ltd's basic earnings per share is $1.25 for the year ended 2012.The company has the following outstanding potential ordinary shares at the start of the year with the following information: Average share price for ABC Ltd during the year is $1.80.
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

ABC Ltd's basic earnings per share is $1.25 for the year ended 2012.The company has the following outstanding potential ordinary shares at the start of the year with the following information:  Average share price for ABC Ltd during the year is $1.80.
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

According to AASB 133, potential ordinary shares that are the most dilutive are the ones that would give the holder the most shares upon conversion. Therefore, the convertible notes would be the most dilutive potential ordinary shares. The least dilutive potential ordinary shares are the ones that would give the holder the least shares upon conversion. Therefore, the employee options would be the least dilutive potential ordinary shares. Hence, the correct choice is C) Employee options, convertible notes as employee options are the least dilutive POS and the convertible notes are the most dilutive POS.

ABC Ltd's Basic Earnings Per Share Is $1