Contingently issuable shares (basic)

Learning objectives

• Determine the date from which contingently issuable shares are included in basic earnings per share (the date when all necessary conditions are satisfied).L2, L3

Normative references

• IAS 33 §24Contingently issuable ordinary shares are treated as outstanding and included in basic earnings per share from the date when all necessary conditions are satisfied.

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

3 questions

• An acquisition agreement provides that Rivoli SA delivers 100,000 ordinary shares to the seller of a subsidiary when all the performance conditions are met. They are met on 1 September; the shares are physically issued on 1 February of the following year. The year ends on 31 December. From which date do these shares enter basic earnings per share?L2
• Hauteville SA has {opening_shares} ordinary shares outstanding throughout the year. An agreement requires it to issue {contingent_shares} additional shares for little or no consideration if a revenue target is met; the target and the other conditions are met on 1 October, {months_since_conditions} months before the reporting date of 31 December (weighting in months). Calculate the weighted contingent shares included in basic earnings, then the weighted average number of ordinary shares.L3
• Under a takeover contract, Valmy SA must issue two tranches of ordinary shares for little or no consideration, under separate conditions. The first tranche, of {tranche1_shares} shares, vests on 1 March: all its conditions have been met for {tranche1_months} months at 31 December. The second, of {tranche2_shares} shares, depends on a condition that is not met at the reporting date. Valmy has {opening_shares} ordinary shares outstanding throughout the year and a profit attributable to ordinary equity holders of {earnings_ordinary} (in euros). Calculate the weighted average number of shares for basic earnings and then earnings per share. Round earnings per share to two decimals (case convention).L3