Ind AS 33: Earnings Per Share

Objective and Scope: The principal objective of Ind AS 33 is to prescribe principles for determining and presenting earnings per share (EPS) amounts in order to improve performance comparisons between different entities in the same period and between different accounting periods for the same entity. However, the prime focus of this Standard is on the denominator of the earnings per share calculation.

This standard is not mandatory on all entities. However, in Indian context, this standard must be applied to all companies that have issued ordinary shares and to which Ind AS notified under Companies Act applies. Any other entity that voluntarily presents EPS must comply with this standard. In case where both consolidated and separate statements are prepared, disclosures pertaining to this standard must apply to both statements.

Important Terms
  • An ordinary share is an equity instrument that is subordinate to all other classes of equity instruments.
  • A potential ordinary share is a financial instrument or other contract that may entitle its holder to ordinary shares

Requirement of Ind AS 33
  • An entity should present basic and diluted EPS for each class of ordinary share that has a different right to share in profit for the period. The EPS should be presented for all periods presented and with equal prominence.
  • An entity that reports a discontinued operation should disclose the basic and diluted amounts per share for the discontinued operation either in the Statement of Profit and Loss or in the notes.
  • In Ind AS, EPS is calculated both in case of Separate Financial Statements and Consolidated Financial Statements
  • EPS is reported for profit or loss attributable to equity holders of the parent entity, for profit or loss from continuing operations attributable to equity holders of the parent entity, and for any discontinued operations.
  • In consolidated financial statements, EPS reflects earnings attributable to the parent’s shareholders.
  • Basic earnings per share should be calculated by dividing profit or loss attributable to ordinary equity holders of the parent entity (the numerator) by the weighted average number of ordinary shares outstanding (the denominator) during the period. In other words, basic EPS=earnings numerator: after deduction of all expenses including tax, and after deduction of non-controlling interests and preference dividends/ denominator: weighted average number of shares outstanding during the period.
  • The weighted average number of ordinary shares outstanding during the period and for all periods presented should be adjusted for events, other than the conversion of  potential ordinary shares, that have changed the number of ordinary shares outstanding without a corresponding change in resources
  • Dilution is a reduction in EPS or an increase in loss per share on the assumption that convertible instruments are converted, that options or warrants are exercised, or that ordinary shares are issued when specified conditions are met.

Diluted EPS calculated as follows:

Earnings numerator: the profit for the period attributable to ordinary shares is increased by the after-tax amount of dividends and interest recognised in the period in respect of the dilutive potential ordinary shares (such as options, warrants, convertible securities and contingent insurance agreements), and adjusted for any other changes in income or expense that would result from the conversion of the dilutive potential ordinary shares;
Denominator: adjusted for the number of shares that would be issued on the conversion of all of the dilutive potential ordinary shares into ordinary shares; and
Anti-dilutive potential ordinary shares are excluded from the calculation.

If the number of ordinary or potential ordinary shares outstanding increases as a result of a capitalization, bonus issue or share split, or decreases as a result of a reverse share split, the calculation of basic and diluted earnings per share for all periods presented should be adjusted retrospectively.

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