Fixing diluted earnings per share: Recognising the dilutive effects of employee stock options

Warrick van Zyl () and Enrico Uliana

Accounting and Finance, 2022, vol. 62, issue 2, 2993-3019

Abstract: This paper proposes changes to the calculation of diluted earnings per share (DEPS). The existing IAS 33 approach is flawed as it ignores the time value of options and treats equity‐settled options differently to cash‐settled options. We derive an alternative method and then compare this with the IAS 33 calculation using examples based on a simple firm as well as a small sample of ASX companies. Our method best describes the change in economic value of the current shareholders and provides a similar result at a DEPS level for both cash‐ and equity‐settled options. It is superior to the existing IAS 33 method and can easily be extended to deal with other dilutive instruments.

Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://doi.org/10.1111/acfi.12927

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:acctfi:v:62:y:2022:i:2:p:2993-3019

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0810-5391

Access Statistics for this article

Accounting and Finance is currently edited by Robert Faff

More articles in Accounting and Finance from Accounting and Finance Association of Australia and New Zealand Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().