How does the IAS 33 dilution report work

With the dilution report you get the dilutive number of shares that you need as part of calculating diluted EPS in line with IAS 33.

Introduction

As part of the IFRS standard IAS 33 concern the disclosure of earnings per share (EPS) and dilutive earnings per share. Stock options and other types of equity compensation are a potential future obligation to the company that may dilute existing shareholders and the EPS. Hence, its potential dilutive impact should be considered as part of disclosing the diluted EPS.

The Optio dilution report provides this impact in the form of dilutive number of shares to be included as part of the potential dilutive shares in the diluted EPS calculation.

How can I get access to the Optio dilution report?

The Optio dilution report is one of the reports in our report suite, which is typically not included in our standard financial reports. Our reporting suite is designed with flexibility in mind, allowing you to add this report at any time to meet your specific reporting needs.

If you're interested in enhancing your financial reporting with the Optio Dilution Report, or if you have any questions about our modular reporting options, please don't hesitate to reach out. Contact your Optio contact person or email us at support@optioincentives.no for more information.

How can I generate the dilution report? 

When you create a new report (see How to create a new financial report), the dilution report will be part of the complete report output if it is included in your report configuration(s).

Note that in case you have several report configurations available, the dilution report may not be included in all of them. Hence, you can try to use a different report config if it is not included in your default report config. If you would like to adjust any of your existing report configs you can reach out to your Optio contact.

What does the dilution report look like?

When you run a report, the first page you are redirected to is a web-version of the report. In the web version of the report you have access to the complete report. You can also download the full report to Excel, and the Excel download will contain all the information you have access to in the web-version of the report. 

To download the report to Excel, you can at any view of the report click on the Download report button. 

Average share price

At the top of the report you will find information about the share prices relevant to the reporting period. When the dilution report is included, this section will be extended by an additional column containing Average share price for the reporting period, which is used for dilution calculations.

By clicking on the Average share price column header you can drill-down to see the underlying share prices used to calculate the average. You can also download this table to Excel.

In the Excel report, the average share price is included as part of the share price table at the top of the Overview tab.

Overview tables

On the overview tab of the report there will be a separate table for the dilution report. This overview table contains a high-level view of the key figures relevant to dilution. 

The dilution overview tables contain the following columns:

1. Underlying Shares: This is the the number of outstanding instruments as of the reporting date, i.e. the CB date.
2. Avg. Outstanding Shares: This is the average number of instruments outstanding for the period, considering for how long of the period they have been outstanding. If a grant was granted halfway through the period, it has only been outstanding for half of the period, and thus a 50% weight has been applied to its quantity for the dilution calculations. Similar, if an award has been fully terminated at some point throughout the period the appropriate weight is applied to reflect for how much of the period the award was outstanding. This is the quantity to be considered for the dilutive calculations.
3. Dilutive Shares: This is the number of dilutive shares which are to be included as part of the dilutive number of shares in the dilutive EPS calculation, which reflects the dilutive impact of all in-the-money instruments that have been outstanding for the period. 

Just like all our overview tables you can select to view the overview table with different groupings to see the dilutive figures according to your liking. If you prefer a different grouping than available, please reach out to your Optio contact and they can configure these tables for you.

In the Excel download you can see the same tables, where each table grouping is included as separate tables stacked on top of each other.

Detailed dilution figures

To get a complete understanding of the dilutive figures in the overview, you can view the detailed dilution figures with a complete audit-trail by clicking on the Dilution tab. 

In the Excel report the dilution details can be accessed by clicking on the Dilution tab in the Excel.

The dilution detailed report has a similar structure to the other report, where each row in the table represent one TRANCHE, which reflects a single vesting of an award for a person, program and sub program basis. On each row you will find information about the specific TRANCHE the row relates to, the relevant input figures used for the dilution calculations, columns with calculations steps, and the resulting dilutive number of shares. The report contains all information required in order to calculate the dilutive figures.

You can also expand a TRANCHE row to see the underlying transactions that have had an impact on the TRANCHE. Meaning there is a full audit-trail of changes to a TRANCHE. In the web version you can expand the TRANCHE by clicking on Show on a particular transaction line.

Once clicked, a module will pop-up showing each underlying transaction as well as the impact they have on the TRANCHE.

In the Excel report you can expand a TRANCHE by clicking on the ungroup [+] button on the left hand side.

Dilution columns

To better understand the dilutive-specific columns found in the dilution report, an explanation of them can be found below:

• Average Quote period: This is the average share priced for the reporting period, the same ones visible on the report Overview tab. This is the share price used for the different dilution calculations. 
  

   

• Transaction dilutive factor: This factor represents the portion of the reporting period a transaction was outstanding. If a GRANT transaction was granted halfway through the period this factor would be 50%. If a TERMINATION transaction was registered just 25% before the CB date it will show a factor of 25%. These factors are used in combination with their respective transaction quantities in order to determine the average quantity for the period. Please note that these calculations occur on a transaction level, hence these factors are only displayed on transaction rows, and not TRANCHE rows.
  

   

• Avg. Quantity Adjusted: This is the result of the transaction quantity, Quantity Adjusted, multiplied with the Transaction Dilutive Factor, to reflect the average outstanding quantity impact of that particular transaction for the period. If a GRANT has a quantity of 500, and the transaction dilutive factor is 50%, the 'Avg. Quantity Adjusted' will be 250 (500 x 50%). Please note that these calculations occur on a transaction level, hence this quantity is only displayed on transaction rows, and not TRANCHE rows.
  

• Avg. Quantity: This column reflects the average outstanding quantity of a TRANCHE for the period, and is calculated by summarizing the Avg. Quantity Adjusted for all underlying transactions.
  

   

• Avg. Quantity Perf. Adj.: This column reflects the Avg. Quantity adjusted for the latest available performance estimate as of the CB date. Please note that according to IAS 33 the performance estimation used for dilution is a bit different than for other reports, so this estimate can be set differently.
  
  

• Assumed exercise quantity: This column reflects the number of instruments that were to be exercised if all in-the-money instruments were assumed to be exercised at the CB date, based on the Avg. Quantity Perf. Adj. Meaning that this column displays the Avg. Quantity Perf. Adj. for instruments where the Average Quote period is higher than the strike, i.e. there is a non-zero intrinsic value.
  
  

• Total strike on assumed exercise: This column shows the total monetary amount the company would receive for the strike employees would have to pay for the Assumed exercised quantity.
  

• Unamortized cost: this is the unamortized IFRS 2 cost to be accrued for the average quantity outstanding for the remaining vesting period as of  the CB date. In line with IAS 33 companies should consider the fair value of the remaining service employees have to provide in return for the awards, as this has a future value for the company, which will reduce the dilutive impact. Please note that if turnover rates are applied to your report, the unamortized cost will be the unamortized cost considering the turnover effect.
  
• Quantity buy back shares: this can be considered the shares that the company could buy back in the market using the total strike on the assumed exercised instruments received from employees, which would not cause any dilution and thus will reduce the dilutive impact of the instruments. This is also where we consider the reduction in dilutive impact due to unamortized cost. The share price considered for the hypothetical buy-back is the average quote for the period. 
  

• Dilutive shares: This is the dilutive number of shares to be included in the diluted EPS calculation. This figure is the difference between Assumed exercise quantity and Quantity buy back shares, and reflects a value loss, or dilution, to existing shareholders due to the share based payment.