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An entity has NON-cumulative preference shares (equity-classified) for which it CHOSE NOT to declare any dividend this year. For EPS purposes:
ADeduct nothing — only DECLARED dividends are deducted for non-cumulative preference shares
BDeduct the average of last 3 years
CDeduct the imputed coupon rate × par value × number of shares
DDeduct what was paid in cash
Answer & Solution
Correct answer: A. Deduct nothing — only DECLARED dividends are deducted for non-cumulative preference shares
Non-cumulative preference dividends are deducted from numerator ONLY when declared. Contrast cumulative preference shares where dividends accrue regardless of declaration and must be deducted.
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