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IAS 33Workpapers (Step 4 of 5)

Workpaper assignment

Step 4 of 5
Mission · workpaperWorkpaper · IAS 33L4 · Expert

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Group profile and file conventions

Memo

Group profile and file conventions

Selvane Group SA (fictitious entity) is the listed parent of a group and closes its consolidated accounts on 31 December 20X6. A disposed line of business is classified as a discontinued operation. File conventions: weighting in whole months out of 12, earnings per share rounded to two decimals (half up), comparisons made on the rounded earnings per share and control number of the dilution test set after preference dividends (rule of the standard: IAS 33, para. 42, which refers to the para. 12 adjustment). Tax rate applicable to interest: 25%, retained by assumption, the tax department not having yet confirmed the rate.

Diluted earnings per share: adjustments, dilutive instruments, ranking by incremental earnings per share and stop at the antidilutive effect: Contingent shares

File of a listed group: basic and diluted earnings per share, retrospective restatements, presentation and disclosures (IAS 33)

8 documents8 sections to document
0 / 5 sections completed
Guided mode

Section 1 of 8

Objective

In progress
Section brief
What to document
The engagement, its scope and the working mode chosen.
Why
A workpaper answers one precise question: framing it avoids off-topic work.
How
Read the objective and the assignment, then choose the mode (guided, semi-guided, professional).
Expected result
You know which question the workpaper must settle, and for which reporting date.
Your role
Preparer of the IAS 33 workpaper
Level
Expert
Estimated time
≈ 75 min
Progress
0 / 4 steps done (review excluded)

Context

Selvane Group SA (fictitious entity), a listed parent, closes its consolidated accounts on 31 December 20X6. In 20X6 it made a rights issue with a bonus element, it has cumulative preference shares, options, a convertible bond and a contingent share agreement, and it disposed of a line of business. A 20X5 error was corrected retrospectively. The preparer builds the earnings per share file, which is submitted to a reviewer. Teaching simulation: the review trail of the file (preparation, reviewer notes and final sign-off) is simulated for demonstration purposes; it is neither a real review nor a validation of the content.

Assignment

Ranking of the instruments and diluted earnings per share

Purpose of the workpaper

For each instrument, compute the numerator adjustment after tax and the incremental shares (weighted conversion, treasury stock method, written put, contingent shares), compute the incremental earnings per share, rank the instruments from the lowest to the highest and compare cumulated earnings per share before and after each instrument: an instrument that does not decrease earnings per share is excluded. Document the judgments and prepare the entries and the note. Amounts, prices and rates are case data; comparisons use earnings per share rounded to two decimals (case convention).

Questions of the file covered by this workpaper

  • Compute the tax effect and the adjustment after tax for the convertible bond.
  • Compute the weighted conversion shares of the bond.
  • Compute the price difference and the incremental shares of the options.
  • Compute the contingent shares retained in diluted earnings per share.
  • Compute the incremental earnings per share of the three instruments.
  • Compute earnings per share from continuing operations at each step.
  • Compare each step with the previous one and retain the lower earnings per share.
  • Are the three instruments retained in diluted earnings per share and on what basis is the test performed?
  • Record the payment of the interest on the convertible bond.

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