Disclosure standards - part 4
Taught by James Griffiths · AI tutor support included
In this lesson, you'll learn how to calculate fully diluted earnings per share (EPS) and understand why it matters for financial reporting.
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In this lesson
- 0:00 Understanding diluted earnings per share
- 1:24 How convertible loans affect EPS
- 2:13 How share options affect EPS
- 3:08 Diluted EPS formula explained
- 4:30 Worked example: Tim's convertible loan
- 7:04 Calculating profit impact from conversion
- 8:04 Disclosure requirements for diluted EPS
About this lesson
Diluted EPS accounts for potential future changes to share capital—such as convertible loans being converted into shares or share options being exercised—that would increase the number of shares in issue and lower the EPS figure. You'll work through the formula, which adjusts both profit (adding back estimated extra earnings net of tax) and share count (including potential new shares), and see how to apply it in practice. This is essential for F2 Financial Reporting, as fully diluted EPS must be disclosed alongside basic EPS whenever it's lower, signalling to investors the potential impact on their returns.
Duration: 9m
Transcript
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