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On the diluted earnings per share

Author: ZhangZuo From: www.yourpaper.net Posted: 2009-12-11 00:44:04 Read:
[Abstract] also known as the after-tax profits per share earnings per share reflects the profitability of all the shares of the listed companies. In order to meet the needs of the earnings per share accounting practices and to promote the standardization of earnings per share, issued by the International Accounting Standards Board International Accounting Standard No. 33 - earnings per share. China's Ministry of Finance issued the "Accounting Standards for Business Enterprises No. 34 - earnings per share. In view of the basic earnings per share is consistent with the previous regulations, the paper mainly discuss new guidelines diluted earnings per share.
[Keywords] earnings per share diluted earnings per share of corporate accounting standards

First, the meaning of diluted earnings per share

China's new guidelines draw on international norms, requires the calculation of basic earnings per share and diluted earnings per share, instead of the existing provisions in the fully diluted earnings per share and weighted average earnings per share.
Dilutive potential ordinary shares for basic earnings per share of corporate existence shall adjust the current net profit attributable to ordinary shareholders and the outstanding weighted average number of ordinary shares to calculate diluted earnings per share. Dilutive potential ordinary shares, assuming the current conversion to ordinary shares would reduce earnings per share of potential ordinary shares.
Disclosure of diluted earnings per share on the one hand to protect the interests of investors, to help the investors in investment decision-making; the other hand, contribute to the corporate governance of listed companies. Especially in the increasingly complicated capital structure, disclosure of understanding more necessary diluted earnings per share. Diluted earnings per share addition to measure the performance of listed companies, but also can be used to reveal the dilution effect of listed companies at the same time in the periodic reports disclosed the basic earnings per share and diluted earnings per share information, investors can easily potential ordinary shares The dilution effect of the size of the judgment, the greater the potential dilution effect, the greater the share price volatility, the listed company's stock price more, there is a warning on the share price. In addition, the issuing company must also work hard to do a good job in management, improve performance and to raise funds in a timely manner to produce the effect, to enhance the value of the stock, in order to make the convertible bonds, warrants and share options are smoothly converted into stock. Diluted earnings per share information, timely delivery of future risk to the issuer and the market, we can play better corporate governance, the role of external mechanisms.

Second, diluted earnings per share calculation

Income calculation
Profit attributable to ordinary shareholders will increase the after-tax amount of dividends and reduce interest recognized in the period, and all changes in income or expenses caused by the conversion of dilutive potential ordinary shares adjusted for dilutive potential ordinary shares, . Specific adjustments include: (1) the current recognized interest to dilutive potential ordinary shares; (2) conversion of dilutive potential ordinary shares will generate income or expenses. The above adjustments related income tax effects should be considered.
2 The number of shares calculated
The calculation of diluted earnings per share, the current issue of the weighted average number of outstanding common shares increased ordinary shares issued ordinary shares for the calculation of the basic earnings per share the weighted average number of ordinary shares and assumed conversion of dilutive potential ordinary shares should and the weighted average number. In calculating the number of shares previously issued dilutive potential ordinary shares shall be deemed to have been in the beginning of the current period. Converted into ordinary shares; dilutive potential ordinary shares issued during the period, shall be deemed to be the date of issue into ordinary shares.
Current weighted average number of common shares outstanding is calculated, there are two issues worth noting: First, in a business combination using corporate merger cases handled by the pooling of interests method (under the same control) should be issued in the merger process or The adjusted weighted average number of canceled stock; Second, in the event of change enterprise resource but will cause a change in the number of ordinary shares in issue during the case (such as the payment of a stock dividend, the reserve for the stock split and shares) to be re-calculated during the presentation of the number of shares and retrospectively adjust all during the presentation of earnings per share. In calculating the weighted average number of ordinary shares outstanding, with particular attention to the business combination accounting methods, different accounting methods. The outgoing ordinary shares outstanding is not the same. Business combination under common control are accounted for using the purchase method. Net profit before corporate merger under the purchase method, the merger is not included in the net profit of the merged companies. Therefore, the adjustment to increase the number of ordinary shares = line right to convert the number of ordinary shares per diluted share amount average market price. Calculation of diluted earnings per share, the number of ordinary shares and the weighted average number of shares in the calculation of basic earnings per share plus all the weighted average number of ordinary shares with dilutive potential ordinary shares are converted into ordinary shares to be issued. Dilutive potential ordinary shares shall be deemed to have been converted at the beginning of the period or the date of issue of the potential ordinary shares into ordinary shares.
Current converted into ordinary shares, from the beginning of the period to the date of conversion, should be included in the calculation of diluted earnings per share, the weighted average number of ordinary shares; conversion is complete, to the end of the period from the date of conversion should be diluted potential ordinary shares included in the calculation of basic earnings per share the weighted average number of ordinary shares. Three new standards of diluted earnings per share under the less than

New guidelines for the lack of a detailed explanation of the potential ordinary shares
The International Accounting Standards form of potential ordinary shares is defined as "a kind of financial instruments that may be given to the rights of holders of ordinary shares or other contracts. And a specific interpretation of cases of potential ordinary shares, including convertible debt or equity instruments into common stock, preferred stock, warrants, or stock options, allowing employees to obtain ordinary shares as part of the remuneration of employees plan or other shares purchase plan, or shares of And further description of the circumstances in which these securities has diluted and included in the potential ordinary shares.
Our earnings per share of the new guidelines direct reference to the concept of "potential ordinary shares, convertible bonds, warrants and share options, but only mentioned in the Explanation of potential ordinary shares, and does not involve the preference shares and or shares, potential ordinary shares are referred to not as a specific explanation and further instructions. Doing taking into account our current variety of financial instruments of the capital market is relatively limited, if enumerated guidelines may cause misunderstanding. Especially in China also widespread preference shares, just due to the the country newly revised "Company Law" not covered by the provisions of the preferred shares issued new guidelines did not consider the impact on basic and diluted earnings per share.
New guidelines for the calculation of diluted earnings per share, did not consider the impact of "anti-dilution"
The so-called anti-dilution, refers to the assumed conversion options and warrants are exercised, or meet specific conditions of ordinary shares in issue of convertible securities, resulting in earnings per share increase or reduction of the loss per share.
Earnings per share of Standard 40 "potential ordinary shares are converted into ordinary shares would increase continuing normal operating earnings per share or decrease loss per share continuing normal operations, the potential ordinary shares is anti-dilutive nature." And , in the calculation of diluted earnings per share, with the anti-dilutive potential ordinary shares will not be considered. And our earnings per share guidelines did not define the term "anti-dilution", and more impossible mentioned whether the calculation of diluted earnings per share for the presence of anti-dilution. Varieties from China's capital markets and financial issue, the legal status of the options yet to be established, warrants just entered the pilot phase, has a certain scale of financial instruments only convertible bonds. In our the special capital markets environment, the issue of convertible bonds generally insufficient liquidity of listed companies, companies generally want to holders of convertible bonds convertible into ordinary shares in the bonds before maturity, and do not want to pay final compensation this interest rates. Based on the current market conditions, the exercise or conversion of potential ordinary shares generally will not "anti-dilution", so the new accounting standards in the development of anti-dilution are identified and described, but it does not appear at this stage does not mean that after this happens, the integrity of the order criteria, lack of this part questionable.
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