Home › CA Final › financialreporting › Ind AS 33 — Earnings Per Share: Basic EPS, Preference Share Adjustments, Increasing-Rate Preference Shares, Redemption/Early Conversion › Entity D issued ₹100 par cumulative class A pref…
Entity D issued ₹100 par cumulative class A preference shares on 1 Jan 20X1 at ₹81.63 each (a discount), entitled to a ₹7 cumulative annual dividend STARTING 20X4. Market yield on issue is 7%. For 20X1, the imputed preference dividend for EPS purposes (amortised from the original-issue discount) is:
A₹7 per share (the eventual coupon)
B₹18.37 per share (full discount)
C₹5.71 per share (= 81.63 × 7%, effective-interest amortisation of the discount)
D₹0 — no dividend until 20X4
Answer & Solution
Correct answer: C. ₹5.71 per share (= 81.63 × 7%, effective-interest amortisation of the discount)
Increasing-rate preference shares — original issue discount is amortised using effective interest method to retained earnings and treated as a preference dividend for EPS. Year 20X1: 81.63 × 7% = ₹5.71. Carrying amount becomes 87.34.
Related questions
Identify the correct statement about EPS computation under Ind AS 33.An entity issued preference shares at a premium of ₹1,00,000 to compensate buyers for an AInd AS 33 lists examples of POTENTIAL ORDINARY SHARES. Which is NOT one?An entity's preference shares are classified as a financial LIABILITY. The interim period An item of income/expense is required to be in P&L per Ind AS but the entity instead crediAn entity has NON-cumulative preference shares (equity-classified) for which it CHOSE NOT ABC Ltd. issues 9% preference shares of ₹10 each, total issue value ₹10 lakh; 5-year tenorAdjustments to EPS numerator for year 20X4: PAT ₹1,50,000; amortisation of discount on inc