earning per share as- 20
TRANSCRIPT
Accounting Standard (AS) - 20Earnings Per Share
By Vikas Dubey
2Index Objective
3 Definitions
4 Scope & Presentation
5 Basic Earning Per Share (Measurement)
6-11 Diluted Earning Per Share(Measurement)
12-14 Disclosure
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3Objective
To prescribe principals for determination and presentation of earning per share.
To improve comparability of performance among different enterprises
and among different accounting period in same enterprise.
4Definitions
An equity share is a share other than a preference share. A preference share is a share carrying preferential rights to
dividends and repayment of capital. A financial instrument is any contract that gives rise to both
a financial asset of one enterprise and a financial liability or equity shares of another enterprise.
A potential equity share is a financial instrument or other contract that entitles, or may entitle, its holder to equity shares.
Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s length transaction.
5Scope and Presentation
Scope: This standard is applicable to all entities.
Presentation:An enterprise should present :
basic and diluted earnings per share (positive or negative) on the face of the statement of profit and loss
for each class of equity shares.
6Basic Earning Per Share
Profit or Loss Attributable to equity shareholder=
Weighted average number of equity shares outstanding during the period.
7Calculation of Profits/Loss attributable to Equity shareholder Net Profit/Loss for the period xx
(after adjusting all prior period & extraordinary items)
Less: Tax Liability xx (Current & Deferred Tax)
Net Profit attributable to Shareholder’s xx
Less: Preference share dividend & any xx attributable tax on Pref. Dividend
Net Profit/loss attributable to Equity shareholder’s xx
8Weighted average number of outstanding Equity sharesShares issued Weight to be considered from
dateFor Cash cash receivable
Conversion of debt conversion
In lieu of interest or principal on other financial instruments
interest ceases to accrue
For settlement of liability Settlement becomes effective
Acquisition of asset Acquisition is recognised
Services rendered When service is rendered
Amalgamation (Purchase) Acquisition
9Continued..
Shares issued Weight to be considered from date
Amalgamation (Merger) From the beginning of reporting period
Bonus share From the beginning of reporting period
Right issue Adjusted with right factor ( Note 1)
10 Note 1 Right Issue
In a right issue, offer price is often less than the fair value of share,
therefore it includes bonus elements.
Right Factor
Fair value per share immediately prior to right issue= Theoretical ex- right fair value per share
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Theoretical Ex-Right Fair Value Per Share
Aggregate Fair Value of share immediately prior to the exercise of the right
+ = Proceeds from exercise of the right No. of share outstanding after the right issue
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Diluted Earning Per Share
Diluted Earnings : The amount of net profit/ loss for the period attributable to equity shareholders,
should be adjusted by the following, any dividends on dilutive potential equity shares, interest recognised any other changes in expenses or income that would result from
the conversion of the dilutive potential equity shares.
after taking into account any attributable change in tax expense.
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Diluted Earnings cont.
Net Profit/loss attributable to Equity shareholder’s XX(as calculated in slide no. 8)
Add: Payments* that are not required to be made XX because of such conversion
(dividend on convertible pref. share or interest on convertible debt)Less: Payments* that are required to be made XX because of such conversion
(expenses on conversion) Diluted Earnings XX
* Net of taxes
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Measurement
Diluted Earning Per Share:
Profit or Loss Attributable to equity shareholder
(after adjustments of diluted earnings)
=
Weighted average number of equity shares outstanding during the period. (assuming the conversion of diluted potential equity share)
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Disclosure
Basic & diluted EPS on the basis of earnings excluding of extraordinary items.
Nominal Value of shares. the amounts used as the numerators in calculating basic and
diluted earnings per share. Number of equity shares used as the denominator in calculating
basic and diluted earnings per share.
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Thank You