Understanding IAS 33: Earnings Per Share Calculation and Diluted EPS

Question 4 Which of the following is correct under the scope of IAS 33? A. An entity that reports a discontinued operation is not required to disclose the basic and diluted amounts per share for the discontinued operation. Antidilution is a decrease in earnings per share or an increase in loss per share resulting from the assumption that convertible instruments are converted, that options or warrants are exercised, or that ordinary shares are issued upon the satisfaction of specified conditions. B. For contracts that may be settled in ordinary shares or cash at the holder’s option, the more dilutive of cash settlement and share settlement shall be used in calculating diluted earnings per share. C. When an entity has issued a contract that may be settled in ordinary shares or cash at the entity’s option, the entity shall presume that the contract will be settled in cash.

Under the scope of IAS 33, "Earnings per Share," the correct statement is:

B. For contracts that may be settled in ordinary shares or cash at the holder’s option, the more dilutive of cash settlement and share settlement shall be used in calculating diluted earnings per share.

This means that when calculating diluted earnings per share, the entity should consider the more dilutive scenario between settling the contract in cash or in shares, reflecting the potential dilutive impact on the earnings per share if the convertible instruments were to be exercised or converted.

Statement A is incorrect because an entity that reports a discontinued operation is still required to disclose the basic and diluted earnings per share for the discontinued operation.

Statement C is incorrect because when an entity has issued a contract that may be settled in ordinary shares or cash at the entity's option, the entity should assume the more dilutive outcome, not necessarily presume cash settlement.

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