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Performance-based EMPLOYEE share options (issuance contingent on satisfying performance + service conditions) are, for diluted EPS:
ATreated as contingently issuable shares — included only if the performance condition would be satisfied at the end of the reporting period
BTreated as ordinary options from the grant date
CIgnored until exercise
DAlways anti-dilutive
Answer & Solution
Correct answer: A. Treated as contingently issuable shares — included only if the performance condition would be satisfied at the end of the reporting period
Performance-based options are contingently issuable. They enter the diluted-EPS denominator only when the performance contingency would be considered satisfied as if reporting date were the contingency end. Fixed-or-determinable-terms employee options (no performance condition) are treated as ordinary options from grant date.
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