Share Options (see below) 36 Total 2,085 1511 Diluted EPS £1.38 Share Options £'000 Maximum cash raised from shares (19 x 10,000 x £39) 7,410 Shares issued at average price in year £‘000 (£7.41m/£48) 154 Maximum shares issued (£7.41/£39) 190 Free' shares 36 *Tutorial Note* IAS33 does state that the dilution in relation to the shares should be treated as if issued at the beginning of the year or (if later) the date of issue of the financial instrument concerned. If this is the case there is an argument for saying the number of ‘free’ shares should be 36 x 9/12 =27. Equal credit was given in the marking guide for both approaches. Examiner’s comments This question was generally well answered with the majority of candidates displaying a sound technical knowledge. Answers were, in the majority of cases, well structured and clearly laid out following the structure of the question. It was rare that candidates omitted complete sections of the question and most candidates achieved a pass on this question. A majority of candidates were able to give correct explanations for the treatment of the three issues. In addition the calculations for the share option and pension schemes were mostly accurate with most mistakes being due to carelessness rather than errors of principle The standard of the revised statements of comprehensive income was more mixed with many candidates not correctly adjusting against the appropriate headings, although at least in most cases they did make some attempt to do so. Almost all candidates correctly identified the goodwill adjustment. A surprising number of candidates were unable to calculate the correct number of shares required in the basic EPS computation. Hardly any students correctly calculated the number of free shares for the diluted EPS, although quite a few made a reasonable attempt. Many students did not attempt this part. A weak aspect of the candidates’ performance in respect of this question was in summarising and concluding the impact of the adjustments on the EPS.
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