IAS 33 - Earnings per share (EPS)

Question 1

Earnings per share (EPS)

Answer 1

• Basic EPS: Net earnings available to common shareholders / weighted average common shares outstanding (WACSO) during the year
• Diluted EPS: Hypothetical measure of company earnings attributable to each common shareholder assuming all dilutive securities have been converted to common shares; dilutive elements must be ranked from most to least dilutive in completing the diluted EPS calculation.
  o Stock options: the difference between the number of ordinary shares issued from exercising the options and the number of ordinary shares that would have been issued at the average market price during the period — difference is treated as an issue of ordinary shares for no consideration (no impact on the earnings in the EPS calculation).
  o Convertible bonds: dilutive impact if the after-tax interest per share that would be issued is less than the basic EPS — the after-tax interest on the bond increase earnings and the number of shares issued on conversion is added to the WACSO.

Reference: IAS 33