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TABLE OF CONTENTS CHAPTER I GENERAL PROVISIONS CHAPTER II BASIC EARNINGS PER SHARE CHAPTER III DILUTED EARNINGS PER SHARE CHAPTER IV PRESENTATION CHAPTER I GENERAL PROVISIONS Article 1. For the purpose of regulating the methods for the calculation of the earnings per share as well as the presentation thereof, these Standards are formulated in accordance with the Accounting Standards for Enterprises-Basic Standards. Article 2. These Standards are applicable to enterprises whose ordinary shares or potential ordinary shares have been traded publicly, as well as those which are in the process of issuing ordinary stocks to the public. The term "potential ordinary stock" refer to a financial instrument or other contract that could grants its holder ordinary share rights, including convertible corporate bonds, share warrants, share options, etc. Article 3. An enterprise shall, in its consolidated financial statements, calculate and present the earnings per share on the basis of the consolidated statements. CHAPTER II BASIC EARNINGS PER SHARE Article 4. An enterprise shall calculate the basic earnings per share by dividing the net profits of the current period, which are attributable to the shareholders of ordinary shares, by the weighted average number of ordinary shares issued to the public. Article 5. The weighted average number of ordinary shares issued to the public shall be calculated according to the following formulas: The weighted average number of ordinary shares issued to the public = the number of ordinary shares issued to the public at the beginning of the period + the number of shares newly issued in the current period x the lapsed time after issuance / the time during the reporting period - the number of ordinary shares repurchased in the current period x the lapsed time after repurchase / the time during the reporting period The lapsed time after issuance, the time during the reporting period and the time after the repurchase shall be calculated on the basis of days. Under the precondition that the reasonableness of calculation result is not affected, a simplified calculation method may be adopted. Article 6. The number of newly issued ordinary shares shall, according to the specific terms and clauses of the issuance contract, calculated and determined as of the date of receivable consideration (generally the date of issuance of stocks), including the following circumstances: (1) The number of ordinary shares issued for the purpose of collecting cash shall be calculated as of the date of cash receivables; (2) The number of ordinary shares issued due to conversion of debt to capital shall be calculated as of the date of cessation of calculation of debt interest or the settlement date; (3) For a business combination not under the ordinary control, the number of ordinary shares issued as a consideration shall be calculated as of the purchase date. For a business combination under the ordinary control, the number of ordinary shares issued as a consideration shall be included in the weighted average number of ordinary shares presented in each reporting period; and (4) The number of ordinary shares issued for the purchase of non-cash assets shall be calculated from the date of recognition of the purchase. CHAPTER III DILUTED EARNINGS PER SHARE Article 7. If an enterprise has any diluted potential ordinary shares, it shall respectively adjust the net profits of the current period, which are attributable to the shareholder of ordinary shares, and the weighted average number of ordinary shares issued to the public, and then calculate the diluted earnings per share on the adjusted results. The term "diluted potential ordinary shares" refers to the convertible instruments which may, under an assumption, result in a reduction of earnings per share if they are converted to ordinary shares in the current period. Article 8. To calculate the diluted earnings per share, an enterprise shall, according to the following items, adjust the net profits of the current period which are attributable to the shareholders of ordinary shares: (1) The interests of the diluted potential ordinary shares which have been recognized as expenses in the current period; and (2) The gains or expenses to be brought about or to be incurred from the conversion of the diluted potential ordinary shares. The effects of the aforesaid adjustments on the income tax that should be take into consideration. Article 9. To calculate the diluted earnings per share, the weighted average number of the ordinary shares issued to the public in the current period shall be the summation of the weighted average number of ordinary shares in the calculation of basis earnings per share, and the weighted average number of ordinary shares which are increased for an assumption of converting the diluted potential ordinary shares into ordinary shares already issued. To calculate the weighted average number of ordinary shares which are increased for an assumption of converting the diluted potential ordinary shares into ordinary shares already issued, the diluted potential ordinary shares issued in prior periods shall be assumed to be converted at the beginning of the current period. The diluted potential ordinary shares issued in the current period shall be assumed to be converted on the date of issuance. Article 10. If the exercise prices of the share warrants and share options are lower than the average market price of the ordinary shares of the current period, the dilution shall be take into consideration. To calculate the earnings per share, the number of the ordinary shares increased shall be calculated according to the following formula: The number of ordinary shares increased = the number of ordinary shares to be converted in the exercise of warrants - the exercise price x the number of ordinary shares to be converted in the exercise of warrants / the average market price of ordinary shares in the current period Article 11. Where an enterprise promises that the price for the repurchase of its shares as stipulated in the contract is higher than the average market price of the current period, the dilution shall be take into consideration. When it calculates the diluted earnings per share, the number of the ordinary shares increased shall be calculated according to the following formula: The number of ordinary shares increased = the repurchase price x the number of ordinary shares promised to repurchase / the average market price of the current period - the number of ordinary shares promised to repurchase Article 12. The diluted potential ordinary shares shall be included in the diluted earnings per share on the basis of the extent of dilution, by following the sequential order from the big to the small, until the diluted earnings per share becomes the minimum. CHAPTER IV PRESENTATION Article 13. If the number of ordinary shares issued to the public or potential ordinary shares is increased due to the distribution of dividends, the increase of capital converted by accumulation fund or share split-up, or is reduced due to reverse split-up, but if the amount of the owner's equities is not affected, the earnings per share in each presentation period shall be recalculated according to the number of post-adjustment shares. If the aforesaid changes occur during the period from the balance sheet date to the date on which the financial reports are authorized for issue, the earnings per share in each presentation period shall be recalculated according to the number of post-adjustment shares. If any of the profits and losses of any previous year are retroactively adjusted or restated in accordance with the Accounting Standards for Enterprises No. 28-Changes of Accounting Policies, Estimates and Corrections of Errors, the earnings per share during the period of presentation shall be calculated again. Article 14. An enterprise shall, in its profit statements, separately present the basic earnings per share and the diluted earnings per share. Article 15. An enterprise shall, in its notes, disclose the following information relating to the earnings per share: (1) The process of calculating the numerators and denominator of the basic earnings per share and diluted earnings per share; (2) The potential ordinary shares which are not dilutive during the presentation period but are likely to be dilutive in the subsequent periods; and (3) The information about the important changes in the number of the ordinary shares issued by the enterprise to the public or the potential changes in the number of the ordinary shares during the period from the balance sheet date to the date on which the financial reports are approved for issue. |
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