Document ID: chunk:federal_register_of_legislation:F2021C00879:body:0:p28
Version: federal_register_of_legislation:F2021C00879
Segment Type: other
Provision Reference: 
Character Range: 86988–90971

1.52

   (a)         Company A does not have year-to-date profit exceeding CU2,000,000 at 31 March 20X1. The Standard does not permit projecting future earnings levels and including the related contingent shares.
   (b) [(CU2,300,000 – CU2,000,000) ÷ 1,000] × 1,000 shares = 300,000 shares.
   (c) Year-to-date profit is less than CU2,000,000.
   (d) [(CU2,900,000 – CU2,000,000) ÷ 1,000] × 1,000 shares = 900,000 shares.
   (e) Because the loss during the third quarter is attributable to a loss from a discontinued operation, the antidilution rules do not apply. The control number (ie profit or loss from, continuing operations attributable to the equity holders of the parent entity) is positive. Accordingly, the effect of potential ordinary shares is included in the calculation of diluted earnings per share.

Example 8  Convertible bonds settled in shares or cash at the issuer's option
Reference: AASB 133, paragraphs 31–33, 36, 58 and 59
An entity issues 2,000 convertible bonds at the beginning of Year 1. The bonds have a three-year term, and are issued at par with a face value of CU1,000 per bond, giving total proceeds of CU2,000,000. Interest is payable annually in arrears at a nominal annual interest rate of 6 per cent. Each bond is convertible at any time up to maturity into 250 ordinary shares. The entity has an option to settle the principal amount of the convertible bonds in ordinary shares or in cash.
When the bonds are issued, the prevailing market interest rate for similar debt without a conversion option is 9 per cent. At the issue date, the market price of one ordinary share is CU3. Income tax is ignored.

Profit attributable to ordinary equity holders of the parent entity Year 1                                                                                                                        CU1,000,000
Ordinary shares outstanding                                                                                                                                                                       1,200,000
Convertible bonds outstanding                                                                                                                                                                     2,000
Allocation of proceeds of the bond issue:
Liability component                                                                                                                                                                               CU1,848,122(a)
Equity component                                                                                                                                                                                  CU151,878
                                                                                                                                                                                                  CU2,000,000
    (a) This represents the present value of the principal and interest discounted at 9% – CU2,000,000 payable at the end of three years; CU120,000 payable annually in arrears for three years.

The liability and equity components would be determined in accordance with AASB 132 Financial Instruments: Presentation. These amounts are recognised as the initial carrying amounts of the liability and equity components. The amount assigned to the issuer conversion option equity element is an addition to equity and is not adjusted.

Basic earnings per share Year 1:
CU1,000,000                          = CU0.83 per ordinary share
1,200,000

Diluted earnings per share Year 1:
It is presumed that the issuer will 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