EARNING PER SHARE (IAS 33)

Question 1

To which entities is IAS 33 applied? (SCOPE)

Answer 1

• Entities whose ordinary shares or potential ordinary shares are publicly traded.
• Entities in the process of listing ordinary shares or potential ordinary shares in public markets.

Question 2

Where EPS need to be discolsed?

Answer 2

To be disclosed on face of statement of compehensive income

Question 3

Which types of EPS exist?

Answer 3

• Basic EPS
• Diluted EPS: includes potential shares

Question 4

What are Basic earnings?

Answer 4

EPS measures the amount of a company’s profit on a per-share basis. Unlike diluted EPS, basic EPS does not account for the dilutive effects that convertible securities have on EPS.

Basic EPS are profit or loss from continuing operations adjusted for:
- Non-controlling interest’s share of profit
- Dividends on preference shares

It is the Weighted average number of shares

Question 5

What are Diluted earnings?

Answer 5

Are Basic earnings adjusted for after-tax effect of Change in Statement of Comprehensive Income that will result from conversion of all potential ordinary shares (such as convertible bonds or convertible preferred stock).

Question 6

How are diluted EPS calculated?

Answer 6

(Net income + interest on loan) / outstanding share + potential shares

Question 7

When Basic EPS and diluted EPS are equal?

Answer 7

When there are not potential ordinary shares.

Question 8

What Does a Higher EPS Indicate?

Answer 8

A higher EPS, all else equal, is favorable as it represents increased profitability to the firm. One must check how many shares are outstanding and consider both historical EPS and forward projections in addition to current results.