Document ID: chunk:federal_register_of_legislation:F2021C00879:body:0:p24
Version: federal_register_of_legislation:F2021C00879
Segment Type: other
Provision Reference: 
Character Range: 60416–64762

rate preference shares
          Example 2 Weighted average number of ordinary shares
          Example 3 Bonus issue
          Example 4 Rights issue
          Example 5 Effects of share options on diluted earnings per share
          Example 5A Determining the exercise price of employee share options
          Example 6 Convertible bonds
          Example 7 Contingently issuable shares
          Example 8 Convertible bonds settled in shares or cash at the issuer's option
                 Example 9 Calculation of weighted average number of shares: determining the order in which to include dilutive instruments
                 Example 10 Instruments of a subsidiary: calculation of basic and diluted earnings per share
          Example 11 Participating equity instruments and two-class ordinary shares
                 Example 12 Calculation and presentation of basic and diluted earnings per share (comprehensive example)

Illustrative examples
These examples accompany, but are not part of, AASB 133.

Example 1  Increasing rate preference shares
Reference: AASB 133, paragraphs 12 and 15
Entity D issued non-convertible, non-redeemable class A cumulative preference shares of CU100 par value on 1 January 20X1. The class A preference shares are entitled to a cumulative annual dividend of CU7 per share starting in 20X4.
At the time of issue, the market rate dividend yield on the class A preference shares was 7 per cent a year. Thus, Entity D could have expected to receive proceeds of approximately CU100 per class A preference share if the dividend rate of CU7 per share had been in effect at the date of issue.
In consideration of the dividend payment terms, however, the class A preference shares were issued at CU81.63 per share, ie at a discount of CU18.37 per share. The issue price can be calculated by taking the present value of CU100, discounted at 7 per cent over a three-year period.
Because the shares are classified as equity, the original issue discount is amortised to retained earnings using the effective interest method and treated as a preference dividend for earnings per share purposes. To calculate basic earnings per share, the following imputed dividend per class A preference share is deducted to determine the profit or loss attributable to ordinary equity holders of the parent entity:

Year                                  Carrying amount of class A preference shares 1 January  Imputed(a) dividend  Carrying(b) amount of class A preference shares 31 December  Dividend paid

                                      CU                                                      CU                   CU                                                           CU

20X1                                  81.63                                                   5.71                 87.34                                                        –
20X2                                  87.34                                                   6.12                 93.46                                                        –
20X3                                  93.46                                                   6.54                 100.00                                                       –
Thereafter:                           100.00                                                  7.00                 107.00                                                       (7.00)
(a) at 7%
(b) This is before dividend payment.

Example 2  Weighted average number of ordinary shares
Reference: AASB 133, paragraphs 19–21

                                                                                                                                                           Shares issued  Treasury(a) shares       Shares outstanding

1 January 20X1                                                                                                       Balance at beginning of year          2,000                              300                      1,700
31 May 20X1                                                                                                          Issue of new shares for cash          800                                –                        2,500
1 December 20X1                                                                                                      Purchase