Example 1 - Increasing Rate Preference Shares
Reference: IAS 33, paragraphs 12 and 15
Entity D issued non-convertible, non-redeemable class A cumulative preference shares of CU100 par value on 1 January 20X1. The class A preference shares are entitled to a cumulative annual dividend of CU7 per share starting in 20X4.
At the time of issue, the market rate dividend yield on the class A preference shares was 7 per cent a year. Thus, Entity D could have expected to receive proceeds of approximately CU100 per class A preference share if the dividend rate of CU7 per share had been in effect at the date of issue.
In consideration of the dividend payment terms, however, the class A preference shares were issued at CU81.63 per share, ie at a discount of CU18.37 per share. The issue price can be calculated by taking the present value of CU100, discounted at 7 per cent over a three-year period.

Because the shares are classified as equity, the original issue discount is amortised to retained earnings using the effective interest method and treated as a preference dividend for earnings per share purposes. To calculate basic earnings per share, the following imputed dividend per class A preference share is deducted to determine the profit or loss attributable to ordinary equity holders of the parent entity:
Year    Carrying amount of class A preference shares    Imputed dividend [1]    Carrying amount of class A preference shares    Dividend paid
    1 January        31 December [2]    
    CU    CU    CU    CU
20X1    81.63    5.71    87.34    -
20X2    87.34    6.12    93.46    -
20X3    93.46    6.54    100.00    -
Thereafter:    100.00    7.00    107.00    (7.00)
1 at 7%

2 This is before dividend payment.
Example 2 - Weighted Average Number of Ordinary Shares
Reference: IAS 33, paragraphs 19-21
          Shares issued    Treasury shares [3]    Shares outstanding
1 January 20X1    Balance at beginning of year    2,000    300    1,700
31 May 20X1    Issue of new shares for cash    800    --    2,500
1 December 20X1    Purchase of treasury shares for cash    --    250    2,250
31 December 20X1    Balance at year end    2,800    550    2,250
 
Calculation of weighted average:
(1,700) x 5/12) + (2,500 x 6/12) + (2,250 x 1/12) = 2,146 shares
or
(1,700) x 12/12) + (800 x 7/12) - (250 x 1/12) = 2,146 shares
3 Treasury shares are equity instruments reacquired and held by the issuing entity itself or by its subsidiaries.

Example 3 - Bonus Issue
Reference: IAS 33, paragraphs 26, 27(a) and 28
Profit attributable to ordinary equity holders of the parent entity 20X0    CU180
Profit attributable to ordinary equity holders of the parent entity 20X1    CU600
Ordinary shares outstanding until 30 September 20X1    200
Bonus issue 1 October 20X1    2 ordinary shares for each ordinary share outstanding at 30 September 20X1
     200×2 = 400
Basic earnings per share 20X1    CU600    = CU100
    (200 + 400)    
Basic earnings per share 20X0    CU180    = CU0.30
    (200 + 400)    
Because the bonus issue was without consideration, it is treated as if it had occurred before the beginning of 20X0, the earliest period presented.

Example 4 - Rights Issue
Reference: IAS 33, paragraphs 26, 27(b) and A2
     20X0    20X1    20X2
Profit attributable to ordinary equity holders of the parent entity    CU1,100    CU1,500    CU1,800
Shares outstanding before rights issue    500 shares
Rights issue    One new share for each five outstanding shares (100 new shares total)
     Exercise price: CU5.00
     Date of rights issue: 1 January 20X1
     Last date to exercise rights: 1 March 20X1
Market price of one ordinary share immediately before exercise on 1March 20X1:    CU11.00
Reporting date    31 December
Calculation of theoretical ex-rights value per share
Fair value of all outstanding shares before the exercise of rights + total amount received from exercise of rights Number of shares outstanding before exercise + number of shares issued in the exercise
(CU11.00 x 500 shares) + (CU5.00 x 100 shares)
500 shares + 100 shares

Theoretical ex-rights value per share = CU10.00
Calculation of adjustment factor
Fair value per share before exercise of rights
Theoretical ex-rights value per share
Calculation of basic earnings per share
          20X0    20X1    20X2
20X0 basic EPS as originally reported:    CU1,100 ÷ 500 shares    CU2.20          
20X0 basic EPS restated for rights issue:    CU1,100    CU2.00          
    (500 shares x 1.1)            
20X1 basic EPS including effects of rights issue:    CU1,500         CU2.54    
    (500 x 1.1 x 2/12) + (600 x 10/12)            
20X2 basic EPS:    CU1,800 ÷ 600 shares              CU3.00
Example 5 - Effects of Share Options on Diluted Earnings per Share

Reference: IAS 33, paragraphs 45-47
Profit attributable to ordinary equity holders of the parent entity for year 20X1    CU1,200,000
Weighted average number of ordinary shares outstanding during year 20X1    500,000 shares
Average market price of one ordinary share during year 20X1    CU20.00
Weighted average number of shares under option during year 20X1    100,000 shares
Exercise price for shares under option during year 20X1    CU15.00

Calculation of earnings per share
     Earnings    Shares    Per share
Profit attributable to ordinary equity holders of the parent entity for year 20X1    CU1,200,000          
Weighted average shares outstanding during year 20X1         500,000    
Basic earnings per share              CU2.40
Weighted average number of shares under option         100,000    
Weighted average number of shares that would have been issued at average market price: (100,000×CU15.00) ÷ CU20.00*         (75,000)    
Diluted earnings per share    CU1,200,000    525,000    CU2.29
* Earnings have not increased because the total number of shares has increased only by the number of shares (25,000) deemed to have been issued for no consideration (see paragraph 46(b) of the Standard).

Example 5A - Determining the Exercise Price of Employee Share Options
Editorial note: Inserted by IFRS 2 with effect for accounting periods beginning on or after 1 January 2005. If an entity applies IFRS 2 for an earlier period, these amendments shall be applied for that earlier period.
Weighted average number of unvested share options per employee 1,000
Weighted average amount per employee to be recognised over the remainder of the vesting period for employee services to be rendered as consideration for the share options, determined in accordance with IFRS 2 Share-based Payment CU1,200
Cash exercise price of unvested share options CU15
Calculation of adjusted exercise price
Fair value of services yet to be rendered per employee: CU1,200
Fair value of services yet to be rendered per option: (CU1,200 / 1,000) CU1.20
Total exercise price of share options: (CU15.00 + CU1.20) CU16.20

Example 6 - Convertible Bonds [4]
Reference: IAS 33, paragraphs 33, 34, 36 and 49
Profit attributable to ordinary equity holders of the parent entity    CU1,004
Ordinary shares outstanding    1,000
Basic earnings per share    CU1.00
Convertible bonds    100
Each block of 10 bonds is convertible into three ordinary shares    
Interest expense for the current year relating to the liability component of the convertible bonds    CU10
Current and deferred tax relating to that interest expense    CU4
Note: the interest expense includes amortisation of the discount arising on initial recognition of the liability component (see IAS 32 Financial Instruments: Disclosure and Presentation).
Adjusted profit attributable to ordinary equity holders of the parent entity    CU1,004 + CU10-CU4 = CU1,010
Number of ordinary shares resulting from conversion of bonds    30
Number of ordinary shares used to calculate diluted earnings per share    1,000 + 30 = 1,030
Diluted earnings per share    CU1.010    = CU0.98
    1,030    
4 This example does not illustrate the classification of the components of convertible financial instruments as liabilities and equity or the classification of related interest and dividends as expenses and equity as required by IAS 32.