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CFA Level I · CFA Level I Exam · Analyzing Income Statements

Under IFRS, a company has 1,000,000 ordinary shares outstanding at the start of the year. It issues a 10% stock dividend (bonus issue) in the fourth quarter. In calculating basic earnings per share (EPS) for the current year and the comparative prior year, the company most likely:

The company restates weighted average shares for all periods presented as if the bonus issue happened at the start of the earliest period. A stock dividend raises no new resources, so only restatement keeps EPS comparable across years.

  1. Arestates the weighted average shares for both years as if the bonus issue occurred at the start of the earliest period presentedCorrect
  2. Bweights the new shares only from the bonus issue date in the current year and leaves the prior year unchanged
  3. Cincludes the new shares only in the current year and reports the prior-year EPS as originally stated

Explanation

A stock dividend or split does not change resources, so shares are treated as outstanding from the start of the earliest period presented. Prior-period EPS is restated for comparability. Weighting from the issue date applies to issues that raise resources, not bonus issues.

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