The following information is available for X Ltd for the year ended 31 May 20X1:
1 Share options have been granted to directors giving them the right to subscribe for ordinary shares between 20X1 and 20X3 at £1.20 per share. The options outstanding at 31 May 20X1 were 2,000,000 in number.
2 The company has £20 million of 6% convertible loan stock in issue. The terms of conversion of the loan stock per £200 nominal value of loan stock at the date of issue were:
No loan stock has as yet been converted. The loan stock had been issued at a discount of 1%.
3 There are 1,600,000 convertible preference shares in issue. The cumulative dividend is 10p per share and each preference share can convert into two ordinary shares. The preference shares can be converted in 20X2.
4 Assume a corporation tax rate of 33% when calculating the effect on income of converting the convertible loan stock.
(a) Calculate the diluted EPS according to IAS 33.
(b) Discuss why there is a need to disclose diluted earnings per share.