Chapter 14: Earnings per Share
Financial Reporting and Analysis
Spring 2025
Learning Objectives
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Introduction
• EPS
• Earnings per Share (EPS) is widely regarded as the most important indicator of
a company’s performance. It is important that users of the financial
statements:
• Are able to compare the EPS of different entities;
• Are able to compare the EPS of the same entity in different accounting periods.
• IAS 33 Earnings per Share achieves comparability by:
• Defining earnings
• Prescribing methods for determining the number of shares to be included in the
calculation of EPS
• Requiring standard presentation and disclosures.
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The Scope of IAS 33
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Basic EPS
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Issue of shares at full market price
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Illustrative Example 1
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Test Your Understanding 1
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Bonus Issue
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Illustrative Example 2
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Illustrative Example 3
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Test Your Understanding 2
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Bonus and Market issues combined
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Rights Issue
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Rights Issue: Four-step Process
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Rights Issue: Four-step Process
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Rights Issue: Four-step Process
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Illustrative Example 4
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Illustrative Example 4
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Test Your Understanding 4
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Diluted EPS
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Basic Principles of Calculation
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Importance of DEPS
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Convertible Instruments
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Illustrative Example 5
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Illustrative Example 5
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Test Your Understanding 5
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Options and Warrants to subscribe for shares
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Options and Warrants to subscribe for shares
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Illustrative Example 6: Options
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Test Your Understanding 6
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Importance of EPS
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Illustrative Example 7
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Limitations of EPS
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Importance of DEPS
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Questions?
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End of Chapter 14
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