Earnings per Share (Ind AS 33): formula sheet

Key formulas

Basic EPS

Basic EPS = Profit attributable to ordinary equity holders of the parent ÷ Weighted average number of ordinary shares outstanding

The numerator is detailed in the Basic EPS topic; here you only need the idea.

Diluted EPS numerator (para 32(a))

Adjusted profit = Profit attributable to ordinary equity holders + after-tax dividends and interest on dilutive potential ordinary shares ± other income or expense changes on conversion

Add back only for items that would stop on conversion, net of tax.

Diluted EPS denominator (para 32(b))

Adjusted shares = Weighted average ordinary shares + weighted average additional shares assuming conversion of all dilutive potential ordinary shares

Include only dilutive items.

Earnings per incremental share

Earnings per incremental share = After-tax adjustment to profit ÷ Additional shares on conversion

Lowest value is most dilutive and is ranked first (para 44). An item is dilutive only if this is below the EPS before including it.

Partly paid shares (para A16)

Shares in diluted EPS = Shares subscribed − Shares assumed purchased from unpaid balance

Applies to the extent they are not entitled to dividends; treated like warrants or options.

Basic EPS

Basic EPS = Profit or loss attributable to ordinary equity holders ÷ Weighted average number of ordinary shares outstanding

This is the rule in paragraph 10. Report it for profit or loss and, if presented, for continuing operations (paragraph 9).

Earnings numerator

Earnings = Profit after tax − after-tax preference dividend (on preference shares classified as equity) − share of profit attributable to non-controlling interests

Non-controlling interest applies to consolidated figures. For standalone problems, ignore it.

Preference dividend to deduct

Non-cumulative: dividend declared for the period. Cumulative: dividend for the period, declared or not

Paragraph 14. Exclude arrears of earlier years paid or declared this year.

Weighted average shares

Σ (Shares outstanding × Months outstanding ÷ 12)

Use days or months consistently. Change the weight whenever the number of shares changes.

Bonus issue multiplier

New shares = old shares × (1 + bonus shares per share held)

Paragraph 28 example: a two-for-one bonus issue multiplies shares by three. Apply to all periods presented as if it happened at the start.

Share split

New shares = old shares × split ratio

A 1 share into 5 shares split multiplies by 5. A reverse split divides the shares. Both are adjusted retrospectively.

Theoretical ex-rights fair value per share (TERP)

TERP = (Fair value of all shares before rights + Proceeds from rights) ÷ Shares after the rights

Fair value is taken immediately before exercise. If rights trade separately, use the close of the last day shares trade together with rights.

Rights issue adjustment factor

Factor = Fair value per share immediately before exercise of rights ÷ TERP

Multiply shares outstanding before the issue by this factor for periods before the rights issue.

Weighted average shares with rights issue

Pre-rights shares × factor × (months before issue ÷ 12) + Post-rights shares × (months after issue ÷ 12)

Use days or months consistently. Post-rights shares are the actual total after the issue.

Diluted EPS

Diluted EPS = (Profit attributable to equity holders + adjustments) ÷ (Weighted average equity shares + dilutive potential shares)

The profit is after preference dividend on non-convertible preference shares. Apply the same weighted average logic as in basic EPS.

Numerator adjustment for convertible debentures

Add back: Interest × (1 − tax rate)

Also add back any other income or expense that would change on conversion, such as amortisation of issue cost, net of tax.

Convertible preference shares

Add back: Preference dividend on the convertible shares

Add back the dividend on the convertible preference shares that was deducted to arrive at profit for basic EPS, together with any related tax effect. Where the dividend is not tax-deductible, no tax adjustment arises.

Treasury stock method for options and warrants

Incremental shares = N × (Average market price − Exercise price) ÷ Average market price

N is the number of shares under option. Use only when average market price is above the exercise price. There is no numerator adjustment.

Incremental EPS (for ranking)

Incremental EPS = Numerator adjustment ÷ Incremental shares

Rank from lowest to highest. Options and warrants with no earnings effect have zero and come first.

Dilution test

Include the instrument only if it reduces EPS (or increases loss per share) from continuing operations

The test uses profit from continuing operations attributable to the parent's equity holders as the control figure.

Timing of conversion

Assume conversion at the start of the period, or the date of issue of the instrument if later

If issued during the year, weight the shares for the part of the year the instrument existed.

Where to present EPS

Basic and diluted EPS in the statement of profit and loss (continuing operations and total), equal prominence, all periods

Para 66 and 67. For each class of ordinary shares with different profit-sharing rights.

Discontinued operations EPS

Basic and diluted per share amounts: in the statement of profit and loss or in the notes

Para 68. Applies only if the entity reports a discontinued operation.

Equal basic and diluted EPS

If basic EPS = diluted EPS, one-line dual presentation is allowed

Para 67. Diluted EPS must still be reported for all periods if reported for any one.

Loss per share

EPS must be presented even if negative

Para 69.

Restatement for bonus issue or split

Restated EPS = Earnings ÷ Revised number of shares, for all periods presented

Para 64. Also for events after the reporting period but before approval of the financial statements.

Other per-share components

Use Ind AS 33 weighted average shares; disclose in notes; state before or after tax; reconcile to a line item

Para 73.

Quick revision

• Basic EPS = profit or loss attributable to ordinary equity holders of the parent ÷ weighted average ordinary shares outstanding.
• Diluted EPS increases the numerator by the after-tax dividends and interest on dilutive potential shares, plus other income or expense changes from conversion.
• Diluted EPS also increases the denominator by the weighted average additional shares assuming conversion of all dilutive potential shares.
• Bonus issue, share split and reverse split change shares without a change in resources, so adjust all periods presented retrospectively.
• Rights issue: theoretical ex-rights fair value = (fair value before exercise × shares before + proceeds) ÷ shares after exercise.
• Rights factor = fair value per share immediately before exercise ÷ theoretical ex-rights fair value; apply it to shares before the issue for earlier periods.
• Potential ordinary shares are antidilutive if conversion would increase EPS or decrease loss per share from continuing operations; exclude them.
• Test each potential share separately, from the lowest earnings per incremental share to the highest; options and warrants usually come first.
• Changes after the reporting period but before approval of the financial statements still restate per-share figures, and the fact must be disclosed.
• Ind AS 33 requires EPS in both consolidated and separate financial statements.
• Share transactions after the reporting period, such as an issue for cash, do not adjust EPS.

Common mistakes

• Calling every convertible instrument dilutive. Fix: Compare earnings per incremental share with EPS before the instrument. Exclude it if it is higher.
• Adding back interest without deducting tax. Fix: Always add back interest net of tax, e.g. interest × (1 − tax rate).
• Not deducting the preference dividend from profit before dividing. Fix: Always write 'PAT − preference dividend' as the first line of the numerator.
• Deducting dividend on cumulative preference shares only when it is declared. Fix: For cumulative shares, deduct the dividend for the period whether or not declared. Do not deduct arrears of earlier years.
• Time-weighting bonus shares from the date of issue Fix: Bonus and split shares are treated as outstanding from the start of the earliest period presented (paragraph 28).
• Using the exercise price instead of fair value in the factor Fix: The factor is fair value just before the rights ÷ TERP. The rights price enters only through the proceeds in TERP.
• Adding back full interest instead of post-tax interest on convertible debentures. Fix: Always compute Interest × (1 − tax rate). Check whether the question gives the tax rate.
• Adding the total number of options to the denominator. Fix: Use the treasury stock method. Only the shares issued for no consideration are incremental: N × (Average price − Exercise price) ÷ Average price.
• Saying EPS need not be shown when there is a loss. Fix: Quote para 69: EPS is presented even if negative, as a loss per share.
• Saying discontinued operation EPS must only be in the notes. Fix: Para 68 allows the statement of profit and loss or the notes.

Exam tips

• Write the objective in the Standard's own idea: comparison across entities and periods, focus on the denominator.
• In MCQs, check whether the instrument is dilutive using earnings per incremental share before choosing.
• Always show the tax adjustment on interest or dividends in your working; step marks depend on it.
• Learn the three Indian differences from IAS 33; they make good short-note points.
• Remember options and warrants are ranked first in the dilution sequence because they do not affect the numerator.
• Show the numerator and denominator as two separate workings. Step marks are given for each.
• Read the preference shares carefully for 'cumulative', 'non-cumulative' and 'classified as equity or liability'. The dividend adjustment depends on these.
• For MCQs, spot the trap first: the usual ones are an undeclared cumulative dividend and a mid-year issue. Then calculate.