Settlement differences on preference shares

Learning objectives

• Explain that settlement differences and similar effects on preference shares classified as equity adjust the numerator.L3, L4

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.
• IAS 33 §16Settlement of preference shares classified as equity (for example under a tender offer): the excess of the fair value of the consideration paid to the holders over the carrying amount of the shares is a return to the preference shareholders and is deducted in calculating profit or loss attributable to ordinary equity holders for basic earnings per share.
• IAS 33 §17Early conversion of convertible preference shares induced by the entity (favourable changes to the original conversion terms or payment of additional consideration): the excess of the fair value of the ordinary shares or other consideration paid over the fair value of the ordinary shares issuable under the original terms is a return to the preference shareholders and is deducted from profit or loss attributable to ordinary equity holders.
• IAS 33 §18When the carrying amount of preference shares settled exceeds the fair value of the consideration paid (a favourable difference), the excess is added to profit or loss attributable to ordinary equity holders in calculating basic earnings per share.

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

1 question

• Évaria SA buys back preference shares classified as equity for an amount that differs from their carrying amount. How does this settlement difference enter basic earnings per share?L3