CERTYNEX IFRS ACADEMY

Normand SA has ordinary shares and a class of participating preference shares, which receive a fixed dividend and then share the remaining profit with the ordinary shares. For basic earnings per share, the entity allocates the year's profit to the ordinary shares after the fixed dividend alone. Which analysis applies?

Earnings per share reflects the preference dividends on the notional basis of a distribution of profit to each class of instruments.

The allocation used is correct: the preference shares are left out of the calculation and the remaining profit goes to the ordinary shares for the year.

The share of the participating shares is determined pro rata to the number of shares, independently of the preference dividends.

The entity chooses between allocation to the ordinary shares and notional allocation, the standard not setting a basis.