Intangibles, Tax, and Cash Flow Flashcards

Under IAS 33, basic earnings per share (EPS) is calculated as:

Answer: Profit attributable to ordinary equity holders divided by the weighted average number of ordinary shares outstanding

Basic EPS uses profit attributable to ordinary shareholders and a time-weighted average share count.

Under IAS 33, diluted EPS is lower than basic EPS because:

Answer: Potential ordinary shares (options, convertibles) are assumed to have been exercised/converted

Diluted EPS includes the dilutive effect of options and convertible instruments in the denominator.

Under IAS 7, which of the following is NOT a cash equivalent?

Answer: An equity investment held for long-term capital appreciation

Equity investments are not cash equivalents because they are subject to significant value changes.

Under IAS 12, the deferred tax rate used should be:

Answer: The tax rate expected to apply when the temporary difference reverses

IAS 12 requires use of enacted or substantively enacted rates at the balance sheet date that apply when differences reverse.

Under IAS 38, how is an intangible asset with a finite useful life subsequently measured?

Answer: At cost or revalued amount less accumulated amortisation and impairment losses

Finite-life intangibles are amortised over their useful life and tested for impairment under IAS 36.

Under IAS 33, a bonus issue (stock dividend) during the year is reflected in EPS by:

Answer: Adjusting the weighted average shares for all periods presented as if the bonus shares were issued at the beginning of the earliest period

Bonus issues are treated as if they always existed, requiring retrospective adjustment of all EPS figures presented.