How MFRS 133 EPS should be recognized and reported in the FS
Basic EPS
Changes in shares outstanding not affecting resources.
- Included in WANOS when all necessary conditions are satisfied
The amount of preference dividend include:
- Contingently issuable shares:
- From the date the consideration is receivable
- Timing for inclusion of new issue of shares
Dividends for the period for cumulative preference shares, whether or not dividends have been declared
Dividends declared for the period non-cumulative preferences shares
- The weighting of the average is on time basis
Should reflects number of shares outstanding at the end of the financial period
WA Number of OS (WANOS) :
References
Diluted
EPS
Diluted EPS is the reduction EPS.
a) Convertible preferences share
b) Share warrants and options
c) Right granted under employee share scheme
d) Contingently issuable
Potential Ordinary Share (POS) refers to a company may have issued certain types of financial instrument that gave rights to OS at a future date. For example:
Diluted EPS
When the effect of the POS is an increase in EPS or a reduction in loss per share:
- Known as anti-dilutive
- POS are excluded in the calculation of diluted EPS.
POS must be considered separately to determine their dilutive effect:
- considered in sequence from the most dilutive to the least dilutive.
= Most dilutive - POS which will result in the lowest earnings per incremental share.
= Least dilutive - shares will be result in the highest earnings per incremental share.
Statement 66: Basic and diluted EPS for profit or loss from continuing operations are disclosed (even if amount is negative) on the face of the statement of comprehensive income.
Statement 68: If discontinued operations are reported, basic and diluted EPS for the discontinued operation should be presented either on the statement of comprehensive income or in the notes.
An entity should disclose the following in notes to financial statement (Statement 70 from MFRS)
- Amount used in both numerators and denominator in calculating basic and diluted EPS
- Reconciliation of both numerators and denominators value for basic and diluted EPS calculation for income before discontinued operation
- Potentially dilute basic earnings per share that were not included in the calculation of EPS because they were anti-dilutive
- Description of common share transactions after reporting period that could have impacted EPS numbers
Convertible Financial instruments:
May have effect on calculation of EPS as follows:
1. Profits
- Convertible debts - interest savings
- Convertible preference dividend - saving of preference dividend
2. The number of shares:
- Number of shares will increase
- If there are choice of rates for conversion - choose the highest
Presentation:
Disclosure:
How to estimate future EPS growth rates. (2012, December 22). Retrieved from stockodo.com/2012/12/22/
how-to-estimate-future-eps-growth-rates/
Hunkar Ozyasar. (n.d.). The Advantages of Earnings Per Common Shares | Finance - Zacks. Retrieved from
http://finance.zacks.com/advantages-earnings-per-common-shares-10276.html
Morni Hayati, & Rahizah, (2012). The Benefits and Challenges of Financial Reporting Standards in Malaysia:
Accounting Practitioners’ Perceptions. Australian Journal of Basic and Applied Sciences, 6(7), 98-108.
Nick Kraakman. (2014, August 12). How to Determine a Realistic Growth Rate for a Company. Retrieved
from https://www.valuespreadsheet.com/value-investing-blog/how-to-determine-a-realistic-growth-rate-for-a-company
Norlia Mat Norwani, Zam Zuriyati M., & Ibrahim Tamby Chek, (2011). Corporate Governance failure and its
impact on Financial Reporting within selected companies. International Journal of Business and Social Science, 2(21), 205-213.
Paul, B.W. Miller, (2002). Quality Financial Reporting. Journal of Accountancy.
Quality financial reporting – how to improve Financial Statements, 2014. pp. 4-5
Rick Wayman. (n.d.). How To Evaluate The Quality Of EPS | Investopedia. Retrieved from http://
www.investopedia.com/articles/analyst/03/091703.asp
MFRS 133 EPS
Product of Bursa Malaysia
Securities
- 644 Structured Warrants, 57 Warrants, 16 REITs, 10 Foreign Listings, 8 Exchange Traded Fund, 4 Special Purpose Acquisition Company, 1 Stapled Securities, 1 Closed-End Fund
Management Committee
Tina Choo Wun Hooi (2012-2015)
- Chief Market Operation Officer
Dato' Tajuddin bin Atan (2011-2015)
Derivatives
Datin Azalina binti Adham (2011-2012)
- Head Strategy and Transformation
Nadzirah Binti Abdul Rashid (2011-2015)
1. Provide primary and material Financial Information in FS
- 5 commodity futures: Crude Palm Oil Futures, USD Crude Palm Oil Futures, Crude Palm Kernel Oil Futures, Gold Futures, USD Plam Oein Futures
- 2 Equity Futures: FTSE Bursa Malaysia Kuala Lumpur Composite Index futures, Single Stocks Futures
- 1 commodity option: Palm Oil Option
- 1 equity option: KLCI Index Option
- provide limited information
Provide primary and material financial information
- information overload - obstruct useful information
Selvarany Rasiah (2011-2015)
Uday Jyaram (2011)
- Global Head of Security Market
- disclose only primary and material information
- clear, concise and effective
- accurate information, assess management stewardship
- assess future net cash flows
Chong Kim Seng (2011-2015)
Siti Zalena binti Sulaiman (2012-2015)
- Head Corporate Risk Management
Jamaluddin Nor Mohamad (2011-2015)
- Director, Islamic and Alternative Markets
Yong Hazadurah binti Md Hashim (2012-2015)
- Chief Information Officer
Chuah Kong Khai (2011)
- Chief Market Operation Officer
Should not only comply with GAAP as minimum level
2. Should not only comply with GAAP as minimum level
- Requirement of GAAP - cannot adequately show the performance of a company
uncertainty
risk
Higher cost of capital,
Reducing the economy
higher rate of return
- Voluntarily expand - scope and quality
- Provide Primary and Material Financial Information (point 1)
Nature of Business
Board of Director
Independent Non Executive Director
- Bursa Malaysia is authorized under s.15 of Capital Markets and Service Act 2007.
- It operated an integrated exchange and offering exchange related services
Chairman
Securities
- Tun Mohamed Dzaiddin Haji Abdullah (2011-2014)
- Tan Sri Amirsham A Aziz (2015)
- Bursa Malaysia offers stock market which investors can participate and selling of shares. There are Main Market and ACE Market.
3. Should adopt IFRS, but not only MFRS and FRS
Should adopt IFRS
- Datuk DR. Syed Muhamad Bin Syed Abdul Kadir (2011-2013)
- Datuk Karownakaran (2013-2015)
- Datuk Chay Wai Leong (2014-2015)
- Dato' Dr. Thilainathan a/l Ramasamy (2011-2012)
- ISham Bin Yusoff (2011-2012)
- Datuk Wong Puan Wah (2011-2012)
- Cheah Tek Kuang (2011-2012)
- Dato Saiful Bahri bin Zainuddin (2011-2012)
- Tan Ong Leong Huat (2011-2014)
- Tan Sri Datuk Dr. Abdul Samad bin Haji Alias (2011-2013)
1. Main Market and ACE Market
- Consists of 794 and 109 companies respectively
- 18 sectors cover 60 economic activities
- Total market capitalization: RM1.7 trillion
Non-Executive Director
- Able to compete with others
- Boost foreigners confidence
Derivative
- Costly, complex and burdensome - high level of disclosure
- Commodity, equity, financial futures and options
- Comprises of 12 derivatives products
- Tun Mohamed Dzaiddin Haji Abdullah (2011-2014)
- Tan Sri Amirsham A Aziz (2015)
- Datuk Seri Tajuddin Atan (2011-2015)
- Datuk DR. MD TAP Salled (2011-2015)
- Dato' Saiful Bahri Zainuddin (2011-2015)
- Dato' Zuraidah Atan (2014-2015)
- Dato' Eshah Meor Suleiman (2014-2015)
Islamic
Public Interest Director
- Islamic capital market, offering diverse Shariah-compliant products
- 22 Sukuk listings valued of USD34.6 billion.
Offshore
- Datuk DR. MD TAP Salleh (2011-2015)
- Datuk Seri Tjuddin Atan (2011-2013)
- Tun Mohamed Dzaiddin Haji Adbullah (2011-2013)
- Dato' Zuraidah Atan (2014-2015)
- Dato' Eshah Meor Suleiman (2014-2015)
- Operate the Labuan International Financial Exchange
- Issuers can list their non-ringgit denominated securities
- Total market capitalization: USD 27.3billion
4. Improve CG in Firms
- CG - right and responsibilities
= BOD - financial reporting process (Yatim, Kent & Clarkson, 2006)
= Auditors - review, follow ISA
- Should act on their responsibilities, best interest for company
- Example failure CG,
- Transmile Group Berhad
- RM522 mil revenue overstate
- RM341 mil PPE is fake
- Lim Guan Eng - press release, poor corporate governance
Improve corporate governance
Introduction
Background
- Formed in November 2011 by MASB and applicable on and after 1 January 2012
- Emphasizes on the calculation of the denominator of EPS
- Equal to IAS 33; entities complying with MFRS 133 automatically comply with IAS 33
- Why? To refine the comparisons of performances between distinct entities in the same reporting time period as well as between different reporting time periods for the same entity
- IAS 33 was incorporated in April 2001 by IASB and was revised in December 2003 where the title was switched to Earnings per Share.
- determine and set principles for the measurements and presentation of earnings per share (EPS)
Objectives
Scope
- The standard is applicable to the following:
a) An entity's financial statements regardless of being separate or individual
- Where the entity trades ordinary or potential ordinary shares in a public market (a local or foreign stock exchange or an over-the-counter market, including domestic and regional markets) or
- It archives or performs the process of archiving the financial statement of the entity with a securities commission or some other regulatory body with the aim to issue ordinary shares in the public market;
- Any entity disclosing EPS shall compute and reveal EPS according to this standard
b) The consolidated financial statements of a group that has a parent:
- Where the entity trades ordinary or potential ordinary shares in a public market ( a local or foreign stock exchange or an over-the-counter market, including domestic and regional markets) or
- It archives or performs the process of archiving the financial statement of the entity with a securities commission or some other regulatory body with the aim to issue ordinary shares in the public market..
- If an entity discloses both consolidated and separated financial statements, then only disclose based on the consolidate data.
- If an entity only discloses separated financial statements, then EPS information is revealed in the statement of comprehensive income only.
- If an entity discloses items of profit or loss in a separate statement, then EPS information is revealed in the separate statement only.
Brian Yap Jun Yew
Cheong Jiun Jun
Kee Seow Pei
Lee Jiun Yeong
Matthew Chong Hon-Chung
Ng Chow Meng
1304181
1304996
1303212
1306514
1305120
1205231
In my opinion, compliance with MFRS133 CAN give benefits the user of financial statement.
Diluted EPS
Bursa Malaysia has complied with these statements for diluted EPS in MFRS 133:
Disclosures of the amounts of numerators and denominators for calculating EPS.
An entity should present basic and diluted EPS in its Statement of Comprehensive Income.
An entity should make adjustments on P&L attributable to ordinary shareholders and weighted average no. of shares outstanding for the effects of all dilutive potential ordinary shares.
- Do not have any descriptions on Statement 70 (c) and (d).
Bursa Malaysia has complied with MFRS 133 under presentation and disclosures of EPS:
Presentation and
Disclosures
Users
Potential ordinary shares are only treated as dilutive when it decrease EPS.
- EPS decreases from 37.2sen to 37.0 sen when added in the effect of share grant.
- shareholders, Prospective Investors & Financial Institutions
It should be divided by weighted average number of ordinary shares outstanding (denominator) during the period.
An entity is required to calculate basic EPS amounts for P&L (from continuing operations) attributable to ordinary shareholders.
- There is only one type of dilutive potential ordinary share for the company:
- Share Grant Plan (Share options/ Share based payments) implemented by the Board of Directors
Bursa Malaysia has complied with these statements for basic EPS in MFRS 133:
Contingently issuable potential ordinary shares are included in the diluted EPS calculation
Performance-based employee share options are treated as contingently issuable shares. Employees share options with non-vested ordinary shares are treated as options in calculating diluted EPS.
Basic EPS
Benefits
Statement 10 & 19:
Statement 9:
- It makes other measures irrelevant
(size of the business)
- Calculate how much the company earned on users' behalf
(EPS X number of stocks)
1. Income calculation for users
- However, users should analyze the trend of the reported EPS in relation to the industry trend
(decreased EPS may due to cyclical causes)
- Makes charting the performance of management over time easier
(time series / trend)
2. Financial performance measurement
1. Income calculation for users
2. Financial performance measurement
3. Indicator of the investor's for investment purpose
4. Used to estimate future growth
- Over the long-term, the money will end up in the hands of shareholders
(long-term income calculation)
- The company board of directors will decide whether some or all of these earnings to be paid or reinvested into business
(Earnings vs. Dividends)
3. Indicator of the users' long-term income
4. Used to estimate future growth
- One of the most important factors that affects a company's share price
(determination of a company's intrinsic value)
- Analyst estimation vs. user's estimation
- (Historical EPS growth)
- (ROE as growth rate)
- (Sustainable growth rate)
- (Realistic growth rate)