Document ID: chunk:federal_register_of_legislation:F2021C00879:body:0:p29
Version: federal_register_of_legislation:F2021C00879
Segment Type: other
Provision Reference: 
Character Range: 90616–96712

settle the contract by the issue of ordinary shares. The dilutive effect is therefore calculated in accordance with paragraph 59 of the Standard.

CU1,000,000 + CU166,331(a)                                                                                                    = CU0.69 per ordinary share
1,200,000 + 500,000(b)

(a) Profit is adjusted for the accretion of CU166,331 (CU1,848,122 × 9%) of the liability because of the passage of time.
(b) 500,000 ordinary shares = 250 ordinary shares × 2,000 convertible bonds

Example 9  Calculation of weighted average number of shares: determining the order in which to include dilutive instruments[3]
Primary reference: AASB 133, paragraph 44
Secondary reference: AASB 133, paragraphs 10, 12, 19, 31–33, 36, 41–47, 49 and 50

Earnings                                                                                        CU

Profit from continuing operations attributable to the parent entity                             16,400,000
Less dividends on preference shares                                                             (6,400,000)
Profit from continuing operations attributable to ordinary equity holders of the parent entity  10,000,000
Loss from discontinued operations attributable to the parent entity                             (4,000,000)
Profit attributable to ordinary equity holders of the parent entity                             6,000,000
Ordinary shares outstanding                                                                     2,000,000
Average market price of one ordinary share during year                                          CU75.00

Potential ordinary shares

Options                        100,000 with exercise price of CU60
Convertible preference shares  800,000 shares with a par value of CU100 entitled to a cumulative dividend of CU8 per share. Each preference share is convertible to two ordinary shares.
5% convertible bonds           Nominal amount CU100,000,000. Each CU1,000 bond is convertible to 20 ordinary shares. There is no amortisation of premium or discount affecting the determination of interest expense.
Tax rate                       40%

Increase in earnings attributable to ordinary equity holders on conversion of potential ordinary shares

                                                                                                                                            Increase in earnings  Increase in number of ordinary shares  Earnings per incremental share

                                                                                                                                            CU                                                           CU

Options
Increase in earnings                                                                                                                        Nil
Incremental shares issued for no consideration                                                           100,000 × (CU75 – CU60) ÷ CU75                           20,000                                 Nil
Convertible preference shares
Increase in profit                                                                                       CU800,000 × 100 × 0.08             6,400,000
Incremental shares                                                                                       2 × 800,000                                              1,600,000                              4.00
5% convertible bonds
Increase in profit                                                                                       CU100,000,000 × 0.05 × (1 – 0.40)  3,000,000
Incremental shares                                                                                       100,000 × 20                                             2,000,000                              1.50

The order in which to include the dilutive instruments is therefore:
1 Options
2 5% convertible bonds
3 Convertible preference shares

Calculation of diluted earnings per share

                                           Profit from continuing operations attributable to ordinary equity holders of the parent entity (control number)  Ordinary shares  Per share

                                                                                                                                                            CU                                        CU

As reported                                                                                                                                                 10,000,000                  2,000,000     5.00
Options                                                                                                                                                     –                           20,000
                                                                                                                                                            10,000,000                  2,020,000     4.95  Dilutive

5% convertible bonds                                                                                                                                        3,000,000                   2,000,000
                                                                                                                                                            13,000,000                  4,020,000     3.23  Dilutive

Convertible preference shares                                                                                                                               6,400,000                   1,600,000
                                                                                                                                                            19,400,000                  5,620,000     3.45  Antidilutive

Because diluted earnings per share is increased when taking the convertible preference shares into account (from CU3.23 to CU3.45), the convertible preference shares are antidilutive and are ignored in the calculation of diluted earnings per share. Therefore, diluted earnings per