Question 1

**Section A**

TechGrowth had 2 million ordinary shares in issue throughout the year ended 31 December 20X5. Profit after tax for the year was $800,000. During the year, the company had 500,000 share options outstanding, exercisable at $2.00 per share. The average market price of TechGrowth's shares during the year was $5.00.

What is the Diluted Earnings Per Share (DEPS) for the year ended 31 December 20X5?

Accepted Answer

For share options, calculate the number of 'free' shares. Formula: Number of options x ((Fair Value - Exercise Price) / Fair Value). Add these free shares to the basic weighted average number of shares to get the denominator for DEPS.

Question 2

What mistakes do candidates make on this ACCA question?

Accepted Answer

Adding the full 500,000 options to the denominator, ignoring the cash proceeds the company would receive.

How to approach this question

Full Answer

Common mistakes

Practice the full ACCA FR — Financial Reporting Practice Exam 5

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