11 Earnings per share

Basic earnings per share are calculated by dividing profit attributable to Volkswagen AG shareholders by the weighted average number of ordinary and preferred shares outstanding during the reporting period.

During the reporting period, Volkswagen AG implemented a capital increase from authorized capital against cash contributions, with existing shareholders' preemptive rights disapplied, by issuing preferred shares. Since their admission to the regulated market on June 12, 2014, these new preferred shares have been included in the calculation of earnings per share.

IAS 33.23 sets out that all potential shares that will be issued upon the conversion of a mandatory convertible note must be accounted for as issued shares and included in the calculation of basic and diluted earnings per share. The number of outstanding preferred shares is therefore increased by the potential preferred shares that would be issued if the mandatory convertible notes issued were actually to be converted. The average number of preferred shares not yet converted that have to be included is calculated based on the maximum conversion ratio resulting from the current minimum conversion price of €147.61. The terms and conditions required the minimum conversion price to be adjusted following the distribution of the dividend. The number of potential preferred shares was calculated retrospectively at the new minimum conversion price in accordance with IAS 33.26, including for the previous year. The finance costs associated with the mandatory convertible notes are not included in the calculation of consolidated profit because the interest component was recognized in other comprehensive income when the note was issued, and interest expense arises only from the amount of compound interest. Since the number of basic and diluted shares is identical, basic earnings per share also correspond to diluted earnings per share. In total, the existing mandatory convertible notes still entitle the holders to subscribe for a maximum of 25,032,179 no-par value preferred shares of Volkswagen AG.

See note 24 for further information regarding the issuance of the mandatory convertible note and the capital increase.