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IAS 33, titled Earnings Per Share, is an International Accounting Standard issued by the International Accounting Standards Board (IASB). It prescribes principles for the determination and presentation of earnings per share (EPS) to improve performance comparisons between different entities and different reporting periods. [1]
IAS 33 applies to entities whose ordinary shares or potential ordinary shares are publicly traded, or entities in the process of issuing such shares. [2] When an entity presents both consolidated and separate financial statements, the EPS disclosures are required only on the basis of the consolidated information. [3]
The objective of basic EPS is to provide a measure of the interest of each ordinary share in the performance of the entity. [4]
Basic EPS is calculated by dividing the profit or loss attributable to ordinary equity holders by the weighted average number of ordinary shares outstanding during the period. [5]
| Basic EPS = | Profit or Loss attributable to ordinary equity holders |
| Weighted average number of ordinary shares outstanding |
The objective of diluted EPS is to show the potential "worst-case" dilution by assuming all dilutive potential ordinary shares were converted into ordinary shares. [8]
For diluted EPS, both the numerator and denominator are adjusted for the effects of all dilutive potential ordinary shares (such as convertible bonds or options): [9]
| Diluted EPS = | Adjusted Profit (Basic Profit + Interest Saved net of tax) |
| Weighted average shares + Potential dilutive shares |
Potential ordinary shares are treated as dilutive only when their conversion would decrease earnings per share or increase loss per share. If the conversion improves the EPS, the shares are antidilutive and must be excluded from the calculation. [10]
When the number of shares changes without a corresponding change in resources (e.g., a bonus issue, share split, or reverse split), the basic and diluted EPS for all periods presented must be adjusted retrospectively. [11]
An entity must present basic and diluted EPS with equal prominence on the face of the statement of comprehensive income. Even if the amounts are negative (a loss per share), the disclosure remains mandatory. [12]
IAS 33 prescribes the principles for the determination and presentation of earnings per share (EPS), so as to improve performance comparisons between different entities in the same reporting period. [13]
| Paragraph | Category | Disclosure Requirement | Description / Examples |
|---|---|---|---|
| IAS 33.66 | Presentation | Face of P&L | Basic and diluted EPS must be presented on the face of the Statement of Comprehensive Income for each class of ordinary shares. |
| IAS 33.69 | Continuing vs. Discontinued | Basic and diluted EPS must be presented for profit or loss from continuing operations and for total profit or loss. | |
| IAS 33.70(a) | Numerators & Denominators | Reconciliation of Earnings | The amounts used as the numerators in calculating basic and diluted EPS, and a reconciliation of those amounts to profit or loss. |
| IAS 33.70(b) | Weighted Average Shares | The weighted average number of ordinary shares used as the denominator, and a reconciliation of these denominators to each other. | |
| IAS 33.70(c) | Dilution | Antidilutive Instruments | Instruments (such as options or convertible bonds) that could potentially dilute basic EPS in the future but were not included in the calculation because they were antidilutive. |
| IAS 33.70(d) | Subsequent Events | Post-period Transactions | A description of ordinary share transactions (e.g., share issues or buybacks) that occurred after the reporting period and would have significantly changed the EPS. |
| IAS 33.73 | Other Measures | Voluntary EPS | If an entity discloses EPS using a reported component of the P&L other than those required by IAS 33, it must provide a reconciliation of the numerator. |