Topic list Syllabus reference

Example: weighted average number of shares

Justina Co, a listed company, has the following share transactions during 20X7.

			Shares
Date	Details	issued
1 January 20X7	Balance at beginning of year	170,000
31 May 20X7	Issue of new shares for cash	80,000
31 December 20X7	Balance at year end	250,000

Required
Calculate the weighted average number of shares outstanding for 20X7.
Solution
The weighted average number of shares can be calculated in two ways.

1. 
   (170,000 X 5/12) + (250,000 x 7/12) = 216,666 shares
   
2. 
   (170,000 x 12/12) + (80,000 x 7/12) = 216,666 shares
   

5. 
   Consideration
   

Shares are usually included in the weighted average number of shares from the date consideration is receivable which is usually the date of issue. The treatment for the issue of ordinary shares in different circumstances is as follows. (IAS 33: para. 21)
Ordinary shares issued as purchase consideration in an acquisition should be included as of the date of acquisition because the acquired entity's results will also be included from that date. (IAS 33: para. 22)
If ordinary shares are partly paid, they are treated as a fraction of an ordinary share to the extent they are entitled to dividends relative to fully paid ordinary shares.