Presentation on AS-20 - Earnings Per Share

Presented By :Praveen Kumar Nahata
ASA & Associates
 Earning
per share is a financial ratio
that gives the information regarding
earning available to each equity
 To improve comparability as between
two or more companies and as between
two or more accounting periods.
This statement is applicable to the
enterprise whose equity shares or
potential equity shares are listed in
stock exchange & It is to be reported by
the enterprises on the face of the
statement of profit and loss a/c.
Types of EPS
 Basic
 Diluted EPS
Calculation of Basic
Net Profit/Loss for the Period
attributable to Equity Shareholders
Weighted average number of equity
shares outstanding during the period
Calculation of Net Profit/Loss for the
period attributable to equity
Calculate the net Profit/loss for the period
including prior period terms and extraordinary
item & deduct tax Liability (Current + Deferred)
Deduct preference share dividend & any
attributable tax on Pre. Dividend
* Dividend on non cumulative preference share
is deducted if dividend is provided
* In cumulative pre. Share if dividend is not
provided than also it will be deducted
Note:- If an enterprise has more than one class of
equity shares, net profit or loss for the period is
apportioned over the different classes of shares in
accordance with their dividend rights
Calculation of Weighted
Average number of
outstanding equity shares
Weight should be given in the no. of days /
months outstanding during the year
List of shares issued, which are to be
Weight to be considered from
Equity shares issued in exchange of
date of cash receivable
Against conversion of debt instrument
date of conversion
Interest or principal of any financial
interest ceases to accrue
For settlement of a liability
settlement becomes effective
Acquisition of assets
Acquisition is recognized
Services rendered
when service is rendered
Bonus Share
from the beginning of the reporting
Amalgamation – Merger
From the beginning of the reporting
Amalgamation – Purchase
From date of acquisition
Right Share
Adjusted with Right Factor
Right Issue
Right issue, An offer of common stock to
existing shareholder, who hold
subscription rights that entitle them to
buy newly issued shares at discount
from the price at which they will be
offered to the public later
So right issue includes the Bonus element
Right Issue
 So
in calculating basic EPS for all
periods prior to right issue is the
number of equity shares outstanding
prior to the issue multiplied by right
factor which is calculated as under
Right Factor
Fair Value per share immediately
prior to right issue
Theoretical ex – right fair value
per share
Theoretical ex-right
fair value per share
Aggregate fair value of share immediately
prior to the exercise of the right +
Proceeds from exercise of the right
Number of shares outstanding
immediately after the right issue
On 01-01-2001 XYZ Ltd. had 500000
shares outstanding on 01-03-2001, it
issued done new share for each five
shares outstanding at Rs. 15. Fair value
of one equity immediately before the
fight issue was Rs.21. Net Profit for the
year was Rs.1500000/- Calculate the
basic EPS
Theoretical ex-right fair value
per share
(21.00 X 500000 Sh.)
(15 X 100000 Sh.)
= Rs. 20.00
(500000 +
Right Factor
= 1.05
Basic EPS
Rs. 1500000
= Rs. 2.55
(500000 X 1.05 X 2/12)
(600000 X 10/12)
Diluted EPS
Net profit attributable to equity shareholders
(after adjustment for diluted earnings)
Average no. of weighted equity shares
outstanding during the period (assuming the
conversion of diluted potential equity shares)
Note:- Potential equity shares are diluted if their
conversion into equity shares reduces the earning per
share if their conversion does not decrease the EPS,
rather it increases the EPS, then the potential equity
shares are not to be considered dilutive
Thank you