CERTYNEX IFRS ACADEMY

Lagune SA has issued convertible bonds split into a liability component and an equity component. To calculate diluted earnings per share under the if-converted method, leaving aside the case of antidilutive instruments, how is the convertible bond taken into account?

The interest on the liability component, net of tax, is added to the numerator, and the additional shares from the assumed conversion are added to the denominator.

The additional shares are added to the denominator without adjusting the interest in the numerator, because interest remains an expense of the year.

The interest is deducted from the numerator and no shares are added to the denominator, since the bond has not yet been converted, which reduces earnings with no effect on the number of shares.

The bond is excluded from the calculation, because the liability component remains a financial liability until actual conversion.