Each Accounting Standard offers wide variety of practical applications to the stakeholders in respect of full disclosure and transparency. Therefore, I hereby try to summarize various dimensions with regard to the following Accounting Standard.
1. The Accounting Standards related with “Earnings per Share.”
A. Ind As -33
B. IAS-33
C. AS -20
2. Differences between Ind AS 33 and IAS 33
| IND AS-33 | IAS -33 |
| 1. The words Approval of the financial statements for issue have been used in the context of financial statements considered for the purpose of events after the reporting period. | 1. The words Authorization of the financial statements for issue have been used in the context of financial statements considered for the purpose of events after the reporting period. |
| 2. The Ind AS 33 requires EPS related information to be disclosed both in consolidated financial statements and separate financial statements. | 2. When an entity presents both consolidated financial statements and separate financial statements, it may give EPS related information in consolidated financial statements only. |
| 3.Relevant terms are Statement of profit and loss and balance sheet | 3. Relevant terms are Statement of Comprehensive Income and Statement of Financial Position |
| 4.Ind AS applicability is governed by the Companies Act and the Rules made thereunder. | 4.Whereas IAS-33 is applicable to listed entity or entity in the process of listing. |
| 5.The following paragraph has been added after paragraph 12.
“Where any item of income or expense which is otherwise required to be recognized in profit or loss in accordance with accounting standards is debited or credited to securities premium account/other reserves ,the amount in respect thereof shall be deducted from profit or loss from continuing operations for the purpose of calculating basic earnings per share” |
5.No such paragraph after paragraph No 12 |
No Major differences between INDAS 33and IAS 33 except the above. Therefore, the following paragraphs relate to both INDAS 33and IAS 33.
3. Objective
The objective of this Standard is to prescribe principles for the determination and presentation of earnings per share, so as to improve performance comparisons between different entities in the same reporting period and between different reporting periods for the same entity.
4. Scope
a. This Indian standard shall apply to companies that have issued equity shares to which Indian Accounting Standards notified under the companies Act apply.
b. An entity that discloses earnings per share shall calculate and disclose earnings per share in accordance with this standard.
c. The Ind AS 33 requires EPS related information to be disclosed both in consolidated financial statements and separate financial statements.
5. Definitions
a. Options, warrants and their equivalents are financial instruments that give the holder the right to purchase ordinary shares.
b. An ordinary share is an equity instrument that is subordinate to all other classes of equity instruments.
c. Dilution and Anti-dilution
| DILUTION | ANTI-DILUTION |
| An reduction in EPS or an increase in LPS resulting from the assumption
*That convertible instruments are converted *That options or warrants are exercised or *That ordinary shares are issued upon the satisfaction of specified condition |
An Increase in EPS or a reduction in LPS resulting from the assumption
*That convertible instruments are converted *That options or warrants are exercised or *That ordinary shares are issued upon the satisfaction of specified condition |
6. Measurement.
An entity shall present in the statement of profit and loss basic and diluted earnings per share for profit or loss from continuing operations
A. BASIC EPS
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.
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.
a. Earnings
Earnings is calculated as follows
Profit before tax (from Continuing operations)
Less: (1) Tax
(2) Preference Dividend
(3) Tax on Preference Dividend
(4) Minority interest
Besides adjusted for the following items with the above figures
(1) Differences arising on the settlement of preference shares
Income/expense debited or credited to securities premium /other reserves
b. The weighted average number of ordinary shares outstanding (the denominator) during the period can be calculated as follows:
Number of ordinary share outstanding at the beginning of period *Time weighting factor
Deduct Number of ordinary shares purchased * Time weighting factor
Add 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.* Time weighting factor.
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 capitalisation 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)
c. Weights to be considered /adjusted from (The table is only indicative in nature. Uncomplete in nature)
| Ordinary shares issued in exchange of cash | Date of cash receivable |
| Bonus shares | Shares included in weighted average from the beginning of the reporting period |
| Share split | Shares included in weighted average from the beginning of the reporting period |
| Right issue | Adjusted with Right factor |
| Purchase of treasury shares for cash | From the date of purchase |
| Contingently issuable shares | Date when all necessary conditions are satisfied |
B. Diluted Earnings per Share can be calculated as follows
Diluted Earnings per Share=Profit or loss attributable to ordinary shareholders (after adjustment for diluted earnings)/Average number of weighted ordinary shares outstanding during the period (Assuming the conversion of diluted potential ordinary shares).
a. Diluted Earnings
Profit or loss (after tax) for the period attributable to existing ordinary shareholders of the parent entity
Add back dividend along with distribution tax on convertible preference shares previously deducted
Add back interest net of tax effect charged on convertible debenture or loans
Add/subtract any other changes in income or expense that would result from the conversion of the dilutive potential ordinary shares.
b. Average number of weighted ordinary shares outstanding during the period
I. Number of ordinary share outstanding at the beginning of period *Time weighting factor
Deduct Number of ordinary shares purchased * Time weighting factor
Add 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.* Time weighting factor.
Add The weighted average number of ordinary shares that would be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares. Dilutive potential ordinary shares shall be deemed to have been converted into ordinary shares at the beginning of the period or, if later, the date of the issue of the potential ordinary shares.
c. Options, warrants and their equivalents
For the purpose of calculating diluted earnings per share, an entity shall assume the exercise of dilutive options and warrants of the entity.
7. Presentation
A.An entity shall present in the statement of profit and loss basic and diluted earnings per share for profit or loss from continuing operations attributable to the ordinary equity holders of the parent entity and for profit or loss attributable to the ordinary equity holders of the parent entity for the period for each class of ordinary shares that has a different right to share in profit for the period. An entity shall present basic and diluted earnings per share with equal prominence for all periods presented.
B.An entity that reports a discontinued operation shall disclose the basic and diluted amounts per share for the discontinued operation either in the statement of profit and loss or in the notes
C.An entity shall present basic and diluted earnings per share, even if the amounts are negative (loss per share)
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