EARNINGS PER SHARE

ACCOUNTING STANDARD-20

PRESENTED By:
DR. RAJ K. AGARWAL
M. Com, FCA, FCS, FICWA, LLB, Ph.D
M/S. RAKESH RAJ & ASSOCIATES
CHARTERED ACCOUNTANTS



ACCOUNTING STANDARD-20
EARNINGS PER SHARE
Authority : ICAI

Applicable from: Accounting period
starting from 1.4.2001

Nature : Mandatory

Objective
to set principles for the determination &
presentation of EPS.

to improve comparison of performance
amongst enterprises for the same period
and amongst different accounting
periods for the same enterprise.
Applicability
Enterprises whose equity shares or potential equity
share are listed on Recognized Stock Exchange.

Other enterprises which disclose earnings per
share in financial statements.

In the case of consolidated financial statements it
should be determined & presented based on
consolidated information

Presentation Requirements
(Disclosures)
An enterprise should present on the face of P&L Account.
Basic EPS wrt equity shares
Diluted EPS wrt potential equity shares
Potential equity share: A financial instrument or contract
that entitles or may entitle, its holder to equity share e.g.
Convertible debentures or preference shares
Share warrants or options
ESOP
Shares issuable upon satisfaction of certain conditions
Presentation Requirements
(Disclosures)
Disclosure to be made for all periods presented
both the amounts to be disclosed with equal
prominence
The information is to be presented even if the
amount disclosed are negative (a loss per share)

Measurement
Basic EPS = Net profit or loss for the period attributable
to equity shareholders(A)/
Weighted average no of equity share
outstanding (B).
(A) = Net profit or loss for for the period after
deducting preference dividend & attributable
tax(CDT) thereon.
(B) = Number of equity shares outstanding at the
beginning of the period, adjusted by the
shares bought back or issued during the
period multiplied by the time weighting
factor.
Time weighting factor is the number of days for which the
specific shares are outstanding as a proportion to total number
of days in the period

Measurement
Basic EPS - Other Issues

Bonus Shares
Shares Split
Reverse Share Split (Consolidation of Shares)
Right Issue
Partly paid shares
Measurement
Diluted EPS= Diluted net profit or loss for the
period attributable to equity
shareholders(C) /
the weighted average no of equity
shares including shares issued on
conversion of all the dilutive
potential equity shares outstanding
during the period (D).


Measurement of Diluted EPS
( C ) = Net profit or loss attributable to equity
shares adjusted for the following net of
tax:

any dividend on dilutive potential equity shares which
has been deducted in arriving profit/loss.
any interest relating to dilutive potential equity shares
any other change in expense or income that would
result from the conversion of dilutive potential equity
shares.

Measurement of Diluted EPS
(D) Aggregate of (B) and the weighted
average number of equity shares which
would be issued on the conversion of all
the dilutive potential equity shares
into equity shares at the beginning of the
period. (If issued during the period, from
the date of issue).

Dilutive Potential Equity shares shall be treated as such only
when their conversion to equity shares would decrease net
profits per shares from continuing ordinary operations.
It shall be presumed that exercise of dilutive options shall be
exercised. It shall also be assumed that issue of shares shall be
at fair value and assumed proceeds shall be received.
RESTATEMENT
In case of :
bonus issue
share split
consolidation
after the Balance Sheet date but before the
adoption of accounts by the BOD, the per share
calculations for those and prior period should be
based on the new number of shares.
the fact should be disclosed in Notes

Additional Disclosures
The amount used as numerators and If the same is not
reported as a line item in the P&L Account, a
reconciliation should be provided.

The weighted average number of equity shares used as
denominators for basic and diluted EPS and a
reconciliation of those to each other.

The nominal value alongwith EPS figures

If an enterprise wishes to disclose more information,
the denominator must be as per this statement





Limited Revision to AS 20
Disclosure of basic and diluted EPS also to
be made on the basis of earnings excluding
extraordinary items (net of tax expense)
ASI 12
Every company, required to give information
under part IV of schedule VI to the Companies
Act, 1956 to calculate and disclose EPS in
accordance with AS 20, even if otherwise not
applicable to it.
Salient Issues
Objective of reporting diluted EPS.
Dividend on cumulative preference shares not provided for
during the earlier years and this year, but shown as contingent
liability, what is the treatment in adjustment of profit or loss.
Where basic and diluted EPS is same, whether both need be
disclosed?
Receipt of share application money and allotments of shares
subsequent to the date of Balance Sheet. Effect thereof?
As-20 whether applicable to consolidated financial statements

Case Study- IFCI Annual Report 2003-04
Basic Earnings per share (Rs. in million)
31.03.2004 31.03.2003
(a) Profit/ (Loss) Computation for
equity shareholders
Net profit/ (Loss) as per P& L A/c (32,297.81) (2,596.97)
Less: Preference Dividend (456.02) (456.02)
Net profit/(Loss) for equity (32, 753.83) (3052.99)
shareholders
(b) Weighted average no. of equity
shares o/s during the year 638,675,762 638,675,762



Case Study- IFCI Annual Report 2003-04
Diluted Earnings per share (Rs. in million)
31.03.2004 31.03.2003
(a) Profit/ (Loss) Computation for
equity shareholders(including
potential shareholders)
Net profit/ (Loss) as per P& L A/c (32,297.81) (2,596.97)
Less: Preference Dividend (456.02) (456.02)
Add: Intt on Conv. Debentures. 570 485.43
Net profit/(Loss) for equity (32, 183.83) (2567.56)
shareholders(including
potential shareholders)
(b) Weighted average no. of equity
shares o/s during the year as per
basic EPS 638,675,762 638,675,762
Add: Potential no. of equity shares (CD)2375303000 2464305000
Weighted average no. of equity 3013978762 3102980762
shares o/s during the year


Case Study- IFCI Annual Report 2003-04
(Rs. in million)
31.03.2004 31.03.2003

Basic Earnings per share (51.28) (4.78)

Dilutive Earnings per share* (51.28) (4.78)

* Since the convertible debentures are anti dilutive, they
have been ignored in the computation of diluted EPS.





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