Earnings Per

Share
IAS 33
 Earnings per share

The objective of basic earnings per share information is to

provide a measure of the interests of each ordinary share of a
parent entity in the performance of the entity over the
reporting period. (par 11)

An entity shall calculate basic earnings per share amounts for

profit or loss attributable to ordinary equity holders of the
parent entity and, if presented, profit or loss from continuing
operations attributable to those equity holders. (par 9)
 How to compute for earnings per share?
Basic earnings per share shall 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. (par 10)

𝑃𝑟𝑜𝑓𝑖𝑡 𝑜𝑟 𝐿𝑜𝑠𝑠
𝑊𝑒𝑖𝑔ℎ𝑡𝑒𝑑 𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑁𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑂𝑟𝑑𝑖𝑛𝑎𝑟𝑦 𝑆ℎ𝑎𝑟𝑒𝑠 𝑂𝑢𝑡𝑠𝑡𝑎𝑛𝑑𝑖𝑛𝑔
 Example 1

Net income ₱ 10,000,000

Weighted number of ordinary 1,000,000
shares outstanding

₱10,000,000
= 10
1,000,000
 Numerator
For the purpose of calculating basic earnings per share, the
amounts attributable to ordinary equity holders of the parent
entity in respect of:
(a) profit or loss from continuing operations attributable to the
parent entity; and
(b) profit or loss attributable to the parent entity

xxx (par 12)

 Example 2

Income from continuing operations ₱ 10,000,000

Less: Income tax expense 3,200,000
After tax income from continuing operations 6,800,000
After tax income from discontinuing operations 2,040,000
Net income ₱ 8,840,000
Weighted number of ordinary shares outstanding 1,000,000

EPS from continuing operations ₱6,800,000

= 6.80
1,000,000
 Example 2
Income from continuing operations ₱ 10,000,000
Less: Income tax expense 3,200,000
After tax income from continuing operations 6,800,000
After tax income from discontinuing operations 2,040,000
Net income ₱ 8,840,000
Weighted number of ordinary shares outstanding 1,000,000

EPS from net income ₱8,840,000

= 8.84
1,000,000
 Numerator
For the purpose of calculating basic earnings per share, the
amounts attributable to ordinary equity holders of the parent
entity in respect of:
a. profit or loss from continuing operations attributable to the
parent entity; and
b. profit or loss attributable to the parent entity
shall be the amounts in (a) and (b) adjusted for the after-tax
amounts of preference dividends, differences arising on the
settlement of preference shares, and other similar effects of
preference shares classified as equity (par 12)
 Example 3.1

Net income ₱ 10,000,000

Weighted number of ordinary shares 1,000,000
outstanding
8% ₱10 preferred shares (1,000,000 outstanding shares)
Dividends fully declared for the current year
 Numerator
The after-tax amount of preference dividends that is deducted from
profit or loss is:
a. the after-tax amount of any preference dividends on non-
cumulative preference shares declared in respect of the period;
and
b. the after-tax amount of the preference dividends for cumulative
preference shares required for the period, whether or not the
dividends have been declared. The amount of preference
dividends for the period does not include the amount of any
preference dividends for cumulative preference shares paid or
declared during the current period in respect of previous periods.
(par 14)
 Example 3.1

Net income ₱ 10,000,000

Weighted number of ordinary shares 1,000,000
outstanding
8% ₱10 preferred shares (1,000,000 outstanding shares)
Dividends fully declared for the current year
₱10,000,000 − ₱800,000
= 9.2
1,000,000
 Example 3.2

Net income ₱ 10,000,000

Weighted number of ordinary shares 1,000,000
outstanding
8% ₱10 cumulative preferred shares (1,000,000 outstanding
shares)
9% ₱5 preferred shares (100,000 outstanding shares)
Dividends were not declared during the year.
 Example 3.2

Net income ₱ 10,000,000

Less: Dividends on cumulative preferred shares 800,000
(1,000,000 outstanding shares X ₱10 par value X
8%)
Numerator 9,200,000
𝑃𝑟𝑜𝑓𝑖𝑡 𝑜𝑟 𝐿𝑜𝑠𝑠
=
𝑊𝑒𝑖𝑔ℎ𝑡𝑒𝑑 𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑁𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑂𝑟𝑑𝑖𝑛𝑎𝑟𝑦 𝑆ℎ𝑎𝑟𝑒𝑠 𝑂𝑢𝑡𝑠𝑡𝑎𝑛𝑑𝑖𝑛𝑔
₱9,200,000
= 9.2
1,000,000
 Example 3.2

Net income ₱ 10,000,000

Weighted number of ordinary shares 1,000,000
outstanding
8% ₱10 cumulative preferred shares (1,000,000 outstanding
shares)
9% ₱5 preferred shares (100,000 outstanding shares)
Dividends were declared during the year.
 Example 3.3
Net income ₱ 10,000,000
Less:
Dividends on cumulative preferred shares (1,000,000 800,000
outstanding shares X ₱10 par value X 8%)
Dividends on preferred shares (100,000 outstanding 45,000
shares X ₱5 par value X 9%)
Numerator 9,155,000
₱9,155,000
= 9.155
1,000,000
 Denominator
…. The weighted average number of ordinary shares outstanding
during the period is the number of ordinary shares outstanding
at the beginning of the period, adjusted by the number of
ordinary shares bought back or issued during the period
multiplied by a time-weighting factor. The time-weighting factor
is the number of days that the shares are outstanding as a
proportion of the total number of days in the period; a
reasonable approximation of the weighted average is adequate in
many circumstances. (par 20)
 Example 4.1
January 1 December 31

1,000,000 1,000,000
shares shares

Jan 1 1,000,000 X 12/12 1,000,000

Dec 31 1,000,000 X 0/12 0
WANOS = 1,000,000 shares
 Example 4.2
January 1 July 1 December 31

1,000,000 1,000,000
shares shares

Jan 1 1,000,000 X 12/12 1,000,000

Jul 1 1,000,000 X 6/12 500,000
WANOS = 1,500,000 shares
 Example 4.3
January 1 July 1 December 31

1,000,000 -500,000
shares shares

Jan 1 1,000,000 X 12/12 1,000,000

Jul 1 -500,000 X 6/12 -250,000
WANOS = 750,000 shares
Example 4.4
 Example 4.4

Outstanding Shares Time-weighting

Date Beg Move End factor
January 1 1,700 1,700 5/12 708
May 31 1,700 800 2,500 6/12 1,250
December 1 2,500 (250) 2,250 1/12 (188)
Weighted average number of shares outstanding 2,146
 Example 4.4

Outstanding Shares Time-weighting

Date Beg Move End factor
January 1 1,700 12/12 1,700
May 31 800 7/12 467
December 1 (250) 1/12 (21)
Weighted average number of shares outstanding 2,146
 Denominator

…. The weighted average number of ordinary shares outstanding

during the period is the (a) number of ordinary shares
outstanding at the beginning of the period, adjusted by the
number of ordinary shares (b) bought back [treasury shares] or
(c) issued during the period multiplied by a time-weighting factor.
The time-weighting factor is the number of days that the shares
are outstanding as a proportion of the total number of days in
the period; a reasonable approximation of the weighted average
is adequate in many circumstances. (par 20)
 Example 4.5
Net income ₱ 10,000,000
January 1: Shares outstanding 1,000,000
April 1: Issued new shares for land 250,000
July 1: Issued new shares for cash 300,000
October 1: Purchased shares 150,000
December 31: Issued new shares for cash 100,000
Ordinary shares outstanding 1,500,000
 Example 4.5 a
Outstanding shares Time-
Date Beg Move End weighting
factor
Jan 1 1,000,000 0 1,000,000 3/12 250,000
Apr 1 1,000,000 250,000 1,250,000 3/12 312,500
Jul 1 1,250,000 300,000 1,550,000 3/12 387,500
Oct 1 1,550,000 -150,000 1,400,000 3/12 350,000
Dec 31 1,400,000 100,000 1,500,000 0/12 0
WANOS 1,300,000
 Example 4.2 b

Outstanding shares Time-weighting WANOS

Date Beg Move End factor
Jan 1 1,000,000 0 12/12 1,000,000
Apr 1 250,000 9/12 187,500
Jul 1 300,000 6/12 150,000
Oct 1 -150,000 3/12 (37,500)
Dec 31 100,000 0/12 0
WANOS 1,300,000
 Example 4.5

Net income ₱ 10,000,000

Weighted average number of ordinary shares 1,300,000

outstanding
₱10,000,000
= 7.6923
1,300,000
Shares are usually included in the weighted average number of
shares from the date consideration is receivable (which is generally
the date of their issue), for example:
a. ordinary shares issued in exchange for cash are included when
cash is receivable;
b. ordinary shares issued on the voluntary reinvestment of dividends
on ordinary or preference shares are included when dividends are
reinvested;
c. ordinary shares issued as a result of the conversion of a debt
instrument to ordinary shares are included from the date that
interest ceases to accrue;
d. ordinary shares issued in place of interest or principal on other
financial instruments are included from the date that interest
ceases to accrue;
e. ordinary shares issued in exchange for the settlement of a
liability of the entity are included from the settlement date;
f. ordinary shares issued as consideration for the acquisition of
an asset other than cash are included as of the date on which
the acquisition is recognized; and
g. ordinary shares issued for the rendering of services to the
entity are included as the services are rendered.
The timing of the inclusion of ordinary shares is determined by
the terms and conditions attaching to their issue. Due
consideration is given to the substance of any contract associated
with the issue.
Share issues → shares issued without consideration

The weighted average number of ordinary shares outstanding

during the period and for all periods presented shall 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. (par
26)
Share issues → shares issued without consideration
Ordinary shares may be issued, or the number of ordinary shares
outstanding may be reduced, without a corresponding change in
resources. Examples include:
a. a capitalization or bonus issue (sometimes referred to as a stock
dividend);
b.a bonus element in any other issue, for example a bonus
element in a rights issue to existing shareholders;
c. a share split; and
d.a reverse share split (consolidation of shares). (par 27)
 Example 4.6
January 1 July 1 December 31

1,000,000 100,000
shares bonus shares

Jan 1 (1,000,000 + 100,000) X 12/12 1,100,000

WANOS = 1,100,000 shares

 Example 4.7
January 1 July 1 December 31

1,000,000 1,000,000
shares bonus shares

Jan 1 (1,000,000 + 1,000,000) X 12/12 1,100,000

WANOS = 2,000,000 shares

 Share issues → shares issued without consideration
In a capitalization or bonus issue or a share split, ordinary shares are
issued to existing shareholders for no additional consideration.
Therefore, the number of ordinary shares outstanding is increased
without an increase in resources. The number of ordinary shares
outstanding before the event is adjusted for the proportionate
change in the number of ordinary shares outstanding as if the event
had occurred at the beginning of the earliest period presented.
For example, on a two-for-one bonus issue, the number of ordinary
shares outstanding before the issue is multiplied by three to obtain the
new total number of ordinary shares, or by two to obtain the number
of additional ordinary shares. (par 28)
 Example 4.8

Net income ₱ 10,000,000

January 1: Shares outstanding 1,000,000
July 1: 20% stock dividends 200,000
Number of ordinary shares outstanding 1,200,000
 Example 4.8
The number of ordinary shares outstanding before the event is
adjusted for the proportionate change in the number of ordinary
shares outstanding as if the event had occurred at the beginning
of the earliest period presented

January 1: (1,000,000 + 200,000) X 12/12 1,200,000

Weighted average number of ordinary shares 1,200,000
outstanding
₱10,000,000
1,000,000 X (1.20) = 8.33
1,200,000
 Example 4.9
Net income ₱ 10,000,000
January 1: Shares outstanding 1,000,000
April 1: Issued new shares for land 250,000
July 1: Issued new shares for cash 300,000
October 1: Purchased shares (150,000)
November 1: Declared 20% stock dividends and 280,000
distributed on November 15.
December 1: Issued new shares for cash 100,000
Ordinary shares outstanding 1,780,000
 Example 4.9a Ending balance approach
Ordinary shares outstanding Bonus TWF
Date Beg Move End Issue
(20%)
Jan 1 1M 1M 0.2M 1.2M 3/12 0.3M
Apr 1 1M 0.25M 1.25M 0.25M 1.5M 3/12 0.375M
Jul 1 1.25M 0.3M 1.55M 0,31M 1.86M 3/12 0.465M
Oct 1 1.550M (0.15M) 1.4M 0.28M 1.68M 2/12 0.28M
Nov 1 1.4M 0.28M 1.68M
Dec 1 1.68M 0.1M 1.78M 1.78M 1/12 0.1483M
WANOS 1.5683M
 Example 4.9a Ending balance approach
Ordinary shares outstanding Bonus TWF WANOS
Date Beg Move End
Jan 1 1,000,000 1,000,000 1.20 3/12 300,000
Apr 1 1,000,000 250,000 1,250,000 1.20 3/12 375,000
Jul 1 1,250,000 300,000 1,550,000 1.20 3/12 465,000
Oct 1 1,550,000 (150,000) 1,400,000 1.20 2/12 280,000
Nov 1 1,400,000 280,000 1,680,000
Dec 1 1,680,000 100,000 1,780,000 1/12 148,333
WANOS 1,568,333
 Example 4.9 b Incremental approach
Ordinary shares Bonus TWF WANOS
outstanding Issue
Date Beg Move End (20%) *
Jan 1 1.0M 0.2M 1.2M 12/12 1.2M
Apr 1 0.25M 0.05M 0.3M 9/12 0.225M
Jul 1 0.3M 0.06M 0.36M 6/12 0.18M
Oct 1 (0.15M) (0.03M) (0.18) 3/12 (0.045M)
Nov 1 0.28
Dec 1 0.1M 0.1 1/12 0.0083
WANOS 1.5683M
 Example 4.9b Incremental approach
Ordinary shares outstanding Bonus TWF WANOS
Date Beg Move End Factor
Jan 1 1,000,000 1.20 12/12 1,200,000
Apr 1 250,000 1.20 9/12 225,000
Jul 1 300,000 1.20 6/12 180,000
Oct 1 (150,000) 1.20 3/12 (45,000)
Nov 1 280,000
Dec 1 100,000 1/12 8,333
WANOS 1,568,333
 Example 4.9 Ending balance approach

Net income ₱ 10,000,000

Weighted average number of ordinary shares 1,568,333
outstanding

₱10,000,000
= 6.3762
1,568,333
For next day
Example 4.10
 The number of ordinary shares outstanding before the event is
adjusted for the proportionate change in the number of ordinary
shares outstanding as if the event had occurred at the beginning of
the earliest period presented.
Date Number of Bonus TWF WANOS
Shares Factor
January 1, Beginning 200 3 12/12 600
20X0 balance
Weighted number of ordinary shares outstanding 600
January 1, Beginning 200 3 12/12 600
20X1 balance
Weighted number of ordinary shares outstanding 600
Example 4.10
Example 4.11
Example 4.11 Ending balance approach
 Example 4.11 Incremental approach
Date Number of Bonus TWF WANOS
Shares adjustment
factor
January 1, Beg 600 12/12 600
20X2
Weighted average number of ordinary shares 600
outstanding

₱1,800
= 3.00
600
 Example 4.11 Incremental approach
Date Number of Bonus TWF WANOS
20X1 Shares adjustment
factor
Jan 1 Beg 500 1.1 12/12 550
Mar 1 Issued with (100 − 50) 10/12 42
consideration
Weighted average number of ordinary shares outstanding 592
₱1,500
= 2.534
592
 Example 4.11 Incremental approach
Date Number of Bonus TWF WANOS
Shares adjustment
factor
January 1, Beginning 500 1.1 12/12 550
20X0 balance
Weighted average number of ordinary shares outstanding 550
₱1,100
= 2.0
550
 Example 4.12
Net income ₱ 10,000,000
January 1: Shares outstanding 1,000,000
April 1: Issued new shares for land 250,000
July 1: Issued new shares for cash 300,000
October 1: Purchased shares (150,000)
November 1: Issued 350,000 new shares through stock 350,000
rights. One new share for each four outstanding shares.
Exercise price is ₱2.50, Market price on Nov 1 is ₱15
December 1: Issued new shares for cash 100,000
Ordinary shares outstanding 1,850,000
 Theoretical ex-rights value per share

𝐹𝑉 × 𝑂𝑢𝑡𝑠𝑡𝑎𝑛𝑑𝑖𝑛𝑔 𝑠ℎ𝑎𝑟𝑒𝑠 𝑏𝑒𝑓𝑜𝑟𝑒 𝑠𝑡𝑜𝑐𝑘 𝑟𝑖𝑔ℎ𝑡𝑠 + 𝑡𝑜𝑡𝑎𝑙 𝑎𝑚𝑜𝑢𝑛𝑡 𝑟𝑒𝑐𝑒𝑖𝑣𝑒𝑑 𝑓𝑟𝑜𝑚 𝑒𝑥𝑒𝑟𝑐𝑖𝑠𝑒 𝑜𝑓 𝑠𝑡𝑜𝑐𝑘 𝑟𝑖𝑔ℎ𝑡𝑠
𝑇𝑜𝑡𝑎𝑙 𝑛𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑠ℎ𝑎𝑟𝑒𝑠 𝑜𝑢𝑡𝑠𝑡𝑎𝑛𝑑𝑖𝑛𝑔 𝑎𝑓𝑡𝑒𝑟 𝑒𝑥𝑒𝑟𝑐𝑖𝑠𝑒 𝑜𝑓 𝑠𝑡𝑜𝑐𝑘 𝑟𝑖𝑔ℎ𝑡𝑠

15 × 1,400,000 + 2.50 × 350,000 ₱21,875,000

= = 12.5
1,750,000 1,750,000
 Bonus Adjustment Factor

𝐹𝑎𝑖𝑟 𝑉𝑎𝑙𝑢𝑒 𝑝𝑒𝑟 𝑠ℎ𝑎𝑟𝑒 𝑏𝑒𝑓𝑜𝑟𝑒 𝑠𝑡𝑜𝑐𝑘 𝑟𝑖𝑔ℎ𝑡𝑠

𝑇ℎ𝑒𝑜𝑟𝑒𝑡𝑖𝑐𝑎𝑙 𝑒𝑥 − 𝑟𝑖𝑔ℎ𝑡 𝑣𝑎𝑙𝑢𝑒 𝑝𝑒𝑟 𝑠ℎ𝑎𝑟𝑒

₱15
= 1.20
₱12.50
 Example 4.12 Ending Balance Approach
Ordinary shares outstanding Bonus TWF WANOS
Date Beginning Move Ending Issue
(20%)
Jan 1 1,000,000 1,000,000 200,000 3/12 300,000
Apr 1 1,000,000 250,000 1,250,000 250,000 3/12 375,000
Jul 1 1,250,000 300,000 1,550,000 310,000 3/12 465,000
Oct 1 1,550,000 (150,000) 1,400,000 280,000 1/12 140,000
Nov 1 1,400,000 350,000 1,750,000 1/12 145,833
Dec 1 1,750,000 100,000 1,850,000 1/12 154,167
Weighted average number of ordinary shares outstanding 1,580,000
 Example 4.12 Ending Balance Approach

Net income ₱ 10,000,000

Weighted average number of ordinary shares 1,580,000

outstanding

₱10,000,000
= 6.33
1,580,000
 Example 4.12 Ending Balance Approach
Ordinary shares outstanding Bonus TWF WANOS
Date Beginning Move Ending
Jan 1 1,000,000 1,000,000 1.20 3/12 300,000
Apr 1 1,000,000 250,000 1,250,000 1.20 3/12 375,000
Jul 1 1,250,000 300,000 1,550,000 1.20 3/12 465,000
Oct 1 1,550,000 (150,000) 1,400,000 1.20 1/12 140,000
Nov 1 1,400,000 350,000 1,750,000 1/12 145,833
Dec 1 1,750,000 100,000 1,850,000 1/12 154,167
WANOS 1,580,000
 350,000
shares issued through exercise of stock rights

280,000 70,000
issued without consideration =
issued with consideration
issued without change in
resources = bonus issue = issued without change in
Outstanding shares before exercise: 1,400,000
Bonus issues as % of outstanding shares: 20%
resources
→ (Adjustment factor – 1) Shares issued through exercise of
→ (1.20 – 1) stock rights: 350,000
Bonus issue: 1,400,000 X 20% = 280,000
Bonus issue: 1,400,000 X 20% =
280,000 Therefore → (350,000 –
280,000) = 70,000 are issued with
consideration.
 Example 4.12 Incremental Approach
Date Movement in Bonus Total TWF WANOS
outstanding Issue * Number of
shares Shares
Jan 1 1,000,000 200,000 1,200,000 12/12 1,200,000
Apr 1 250,000 50,000 300,000 9/12 225,000
Jul 1 300,000 60,000 360,000 6/12 180,000
Oct 1 (150,000) (30,000) (180,000) 3/12 (45,000)
Nov 1 70,000 70,000 2/12 11,667
Dec1 100,000 100,000 1/12 8,333
WANOS 1,580,000
*Bonus issue pertaining to movement in outstanding shares only
 Example 4.12 Incremental Approach

Net income ₱ 10,000,000

Weighted average number of ordinary shares 1,580,000

outstanding

₱10,000,000
= 6.33
1,580,000
 Example 4.12 Incremental Approach
Date Movement Bonus TWF WANOS
Jan 1 Beginning 1,000,000 1.20 12/12 1,200,000
Apr 1 Issued for land 250,000 1.20 9/12 225,000
Jul 1 Issued for cash 300,000 1.20 6/12 180,000
Oct 1 Purchased (150,000) 1.20 3/12 (45,000)
shares
Nov 1 (350K – 280K) 70,000 2/12 11,667
Dec 1 Issued for cash 100,000 1/12 8,333
WANOS 1,580,000
Be very important to know, understand and not be confused …. REMEMBER ALWAYS THAT

Weighted average number of outstanding shares (WANOS) =

Weighted average common share outstanding (WACSO) =

Ordinary share outstanding

Outstanding capital stock
Outstanding common shares
 Weighted average common share outstanding
(WACSO) =
Weighted average number of outstanding shares
(WANOS)

Used only for EPS computation

 Ordinary share outstanding
Outstanding capital stock
Outstanding common shares

Entitled to dividends → used to

determine the amount of cash,
stock and property dividends