IAS-33 Earning Per Share

1.Basic EPS (Actual Number of Shares in Issue)

2.Diluted EPS (Impact of Potential Ordinary Shares on Basic EPS)

EPS = Earnings Available to Ordinary Shareholders (PAT) / Weighted Average Number of Shares

1)Issue of shares during year@MV.

2)Bonus issue during year. (No Inflow Of Resources)

3)Right Issue During Year

Example#1:

PAT = $20,000

1 Jan - Number of Shares = 50000 Shares

1 March – Issue at MV = 10000 Shares

1 September – Issue at MV = 15000 Shares

Basic EPS for Year End 31 Dec?

Solution:

50000 X 2/12 = 8333

60000 X 6/12 = 30000

75000 X 4/12 = 25000

= 63333

Basic EPS = 20000 / 63333 = 32 Cents Per Share

Example#2:

PAT = 45000

1 Jan = 30000

1 July = 20000 issue @ M.V

1 September = 80000 issue @ M.V

EPS = ?

Solution:

Number of Shares : Months: Weighted Average

30000 : 6/12 : 15000

20000
50000 : 2/12 : 8333

80000

130000 : 4/12 : 43333

= 66666

Basic EPS = 45000 / 66666 = 0.67 Per Share

Bonus Issue:

For Comparable EPS assume bonus issue is from start of the Business/Earliest period Presented.

How to Adjust Bonus Issue?

No of shares = 30000

Bonus Issue 1 For 10

No of Shares after bonus Issue

Method # 1

30000

Bonus: 3000 (30000 X 1/10)

33000

Method # 2

{Bonus Fraction} = 30000 X 11/10

= 33000

A. 1 For 5 = 6/5
B. 2 For 5 = 7/5
C. 2 For 10 = 12/10
D. 1 For 4 = 5/4

Question#1:

PAT = $50000

Previous year EPS = 1.10/Share

1. 1 Jan – Number of Shares : 20000 Shares : 1/12

2. 1 Feb – Issue at MV : 10000 Shares : 3/12
3. 1 May – Bonus Issue : 1 For 4 : 4/12
4. 1 Sep – Issue at MV : 15000 Shares : 3/12
5. 1 Dec – Bonus Issue : 2 For 5 : 1/12
Basic EPS = ? : Restated Previous Year EPS = ?

Solution:

Date Number of Shares Time Ratio Bonus Issue Right Issue Weighted Average

1-Jan 20000 1/12 5/4,7/5 - 2916

1-Feb 10000 3/12 5/4,7/5 - 13125

1-May