Preference dividends

Learning objectives

• Calculate the profit or loss attributable to ordinary equity holders after deducting after-tax preference dividends.L1, L2, L3

Normative references

• IAS 33 §12For the purpose of calculating basic earnings per share, the amounts attributable to ordinary equity holders of the parent (total profit or loss and profit or loss from continuing operations) are adjusted for the after-tax amounts of preference dividends, differences arising on the settlement of preference shares, and other similar effects of preference shares classified as equity.

Original summaries of the paragraphs (reference register), never a quotation of the standard.

4 questions

• Malvoisin SA has issued preference shares classified as equity. What adjustment does it make to the profit attributable to the parent to arrive at the numerator of basic earnings per share?L1
• For the year, the profit attributable to the parent of Sabaudia SA is {profit_parent} (in euros) before preference dividends. The preference shares, classified as equity, gave rise to declared dividends of {pref_dividends}, net of any tax effect; dividends of 180,000 were also declared on the ordinary shares. The weighted average number of ordinary shares is {weighted_shares}. Calculate the profit attributable to ordinary equity holders, then basic earnings per share. Round earnings per share to two decimals (case convention).L2
• Delmas SA has two classes of preference shares, both classified as equity, with no tax effect on their dividends. For the year, the dividends declared are {pref_a_dividend} for class A (5% of a nominal amount of 2,000,000) and {pref_b_dividend} for class B (6% of a nominal amount of 1,500,000). The profit attributable to the parent before these dividends is {profit_parent} (in euros) and the weighted average number of ordinary shares is {weighted_shares}. Calculate the profit attributable to ordinary equity holders and then basic earnings per share. Round earnings per share to two decimals (case convention).L3
• The basic profit of Bernay SA attributable to ordinary equity holders, already net of preference dividends, is {earnings_ordinary} (in euros). The entity has two dilutive convertible instruments: a bond whose interest expense before tax is {pre_tax_interest}, deductible at a rate of {tax_rate}% (case datum), and convertible preference shares whose dividends of {convertible_pref_dividends}, already deducted in basic earnings, carry no tax effect. Calculate the numerator of diluted earnings if both instruments are included.L4