# Do you adjust historical figures for rights issues & stock splits?

Under accounting standards (IAS 33), the EPS in prior periods is required to be adjusted for the bonus element so that the history is comparable. The adjustment factor for the bonus element is calculated as the "share price just before the ex-rights date divided by the theoretical ex-rights price of the share". Has this been done on the stock reports?

Yes, all historical figures are adjusted to deal with a share capital adjustment involving splits, consolidations, bonus/scrip issues or rights issues - i.e. capital changes involving no consideration.

Let's take the example of RPC Group (LSE: RPC) which in 2011 had a 5 for 8 rights issue. In their 2012 annual report they give ten year figures - see link to pdf here. Below the figures they state: _"_Comparative figures for earnings per share and dividends per share have been restated after adjusting for the bonus element of the 5 for 8 rights issue in 2011".

## Worked Example

In the case of RPC Group, the calculation that we/Reuters have done (as of January 2012) is as follows:

Right issue: {(Old shares*Cum price) + (New shares*offer price)}/(Old shares+new shares)*Cum price

In this Example: Cum price is: 301.5 GBp
Old shares: 8
New shares: 5
Offer price: 143
Adj factor: (8*301.5+5*143)/(8+5)*301.5=0.797806 The stated split factor is calculated as 1/ Adjustment factor
=1/0.797806
=1.253437

As a result, all historical per share data items, like earning per share and dividend per share, are then adjusted using this adjustment factor of 1.253437.

P.S. You can read a good explanatory article by a contributing blogger, Miserly Investor, on this here.