Financial Reporting · Reporting financial performance

IAS 33 Earnings Per Share: Basic EPS, Bonus and Rights Issues

Updated 11 October 2026 · Fact-checked

Basic EPS under IAS 33 is profit attributable to ordinary shareholders divided by the weighted average number of ordinary shares in the year. For a bonus issue, adjust all earlier shares as if it happened at the start. For a rights issue, use the TERP to build a bonus factor for earlier shares.

Understand IAS 33 Earnings Per Share

Earnings per share (EPS) tells an investor how much profit the entity earned for each ordinary share. It is the denominator of the price/earnings ratio (P/E = market price per share ÷ EPS), so it is one of the most watched figures in listed company accounts. IAS 33 sets out how to calculate and present it.

IAS 33 applies to entities whose ordinary shares are publicly traded, or which are in the process of issuing them. Basic EPS must be shown on the face of the statement of profit or loss for the profit from continuing operations and for the total profit, with equal prominence.

The numerator is the profit for the year that belongs to the ordinary shareholders. Start with profit after tax. Take off any non-controlling interest share in a group. Then deduct preference dividends on preference shares that are classified in equity. Preference dividends on redeemable preference shares classed as liabilities are already in finance costs, so do not deduct them again.

The denominator is the weighted average number of ordinary shares. A share counts only for the part of the year it was in issue. If shares are issued for full market price, you simply weight them by time. A bonus issue and the bonus element of a rights issue do not bring in new resources in the same way, so IAS 33 treats them as if they had always existed. You adjust the earlier shares and restate the comparative EPS.

In the FR exam the focus is basic EPS, including bonus and rights issues. Diluted EPS exists to warn investors about potential future shares, for example from convertible instruments or options, but its calculation is not the main skill tested here. Check the current syllabus and examiner's reports for the exact scope.

Key rules to remember

Basic EPS: Basic EPS = Earnings attributable to ordinary shareholders ÷ Weighted average number of ordinary shares; Earnings = profit after tax, less non-controlling interest, less preference dividends on equity-classified preference shares. Usually quoted in cents.
Weighted average shares (full-price issue): Σ (number of shares × months in issue ÷ 12); Use the date the consideration is receivable, usually the issue date. Work in months unless the question gives days.
Bonus issue adjustment: Bonus factor = shares after the bonus ÷ shares before the bonus (e.g. 1 for 5 bonus gives 6/5); Apply the factor to shares in issue before the bonus, for the whole period from the start of the year up to the bonus date. Do not time-apportion the bonus itself.
Theoretical ex-rights price (TERP): TERP = (Cum-rights value of the existing shares + Cash raised) ÷ Total shares after the issue; For a 1 for 4 rights issue at $2 when the cum-rights price is $3: (4 × $3 + 1 × $2) ÷ 5 = $2.80.
Rights issue adjustment factor: Factor = Cum-rights price ÷ TERP; Apply to shares in issue before the rights issue, for the period before the rights date. Shares after the rights date are weighted normally at their full number.
Restating prior-year EPS: Restated prior EPS = Original EPS × (1 ÷ bonus factor), or × (TERP ÷ cum-rights price) for a rights issue; IAS 33 requires comparatives to be restated for bonus issues and the bonus element of rights issues.

How to solve IAS 33 Earnings Per Share questions

Use the same routine for any basic EPS question. Lay it out in a short table so the marker can follow each line.

1Work out the earnings: profit after tax, less non-controlling interest, less preference dividends on equity-classified preference shares.
2List every movement in share numbers on a timeline: opening shares, full-price issues, bonus issues, rights issues, buy-backs.
3Identify the type of each movement. A full-price issue is weighted by time only. A bonus issue needs a bonus factor. A rights issue needs TERP and a factor.
4For a rights issue, calculate the TERP and then the factor (cum-rights price ÷ TERP).
5Build the weighted average in time periods. For each period before a bonus or rights date, multiply shares by months/12 and by the relevant factor. For periods after, use shares in issue.
6Add the periods together to get the weighted average number of shares.
7Divide earnings by the weighted average shares and state the answer in cents, usually to one decimal place.
8If asked, restate the prior-year EPS using the inverse of the factor, and show the figure on the face of the statement of profit or loss.

Quickest way: Period table with factors

When to use it: Use this in Section A and B objective questions and as the layout in Section C. It stops you missing a factor.

Draw a three-column table: Dates, Shares, Time × Factor.
Write the opening shares first. Add each issue as a new row with its date.
Put the factor next to every row before a bonus or rights date. Leave it blank after.
Multiply each row out and add the column. Divide earnings by the total.
Sense check: a bonus or rights issue should make EPS lower than the unadjusted figure, and the weighted shares should sit between the opening and closing number once factors are applied.

Common mistakes in IAS 33 Earnings Per Share

Weighting a bonus issue by time from its date.
Students treat it like a normal share issue, because new shares appear on a date.
Fix: A bonus issue brings in no cash. Apply the bonus factor to all shares in issue before it, from the start of the year (or their issue date). Shares after the bonus date count at their full number.
Applying the rights factor to all shares in the year, including those after the rights date.
The factor is memorised without thinking about which shares it adjusts.
Fix: The cum-rights/TERP factor only applies to shares in issue before the rights issue and only for the period before it. After the date, shares count at their actual number.
Calculating TERP using the wrong share counts or prices.
Students mix up the subscription price and the market price or forget to count the new shares.
Fix: Take a block of shares, for example 4 existing shares at the cum-rights price plus 1 new share at the issue price, and divide the total value by 5 shares. Write the block out each time.
Forgetting to deduct preference dividends or non-controlling interest from earnings.
The question gives profit after tax and students go straight to dividing.
Fix: Check the statement of profit or loss for profit attributable to owners of the parent. Deduct preference dividends on equity-classified preference shares. Do not deduct ordinary dividends.
Not restating the comparative EPS after a bonus or rights issue.
Students only calculate the current year figure.
Fix: When asked for the comparative, multiply the original EPS by the inverse of the bonus factor, or by TERP ÷ cum-rights price. The comparative must be on the same share basis as the current year.
Using the wrong time periods, for example counting a full year for a share issued mid-year.
Rushing and reading the date as the end of a month.
Fix: Count months from the issue date to the year end and write the fraction, such as 9/12. A 1 April issue in a 31 December year end is 9 months.

Worked examples

Example 1

Alder Co has a 31 December 20X5 year end. Profit attributable to ordinary shareholders is $540,000. On 1 January 20X5 it had 2,000,000 ordinary shares. On 1 July 20X5 it issued 400,000 shares at full market price. On 1 October 20X5 it made a 1 for 5 bonus issue. The EPS reported for 20X4 was 25.0 cents. Calculate basic EPS for 20X5 and the restated 20X4 comparative.

Show the solution

Shares before the bonus issue: 2,000,000 to 30 June, then 2,400,000 from 1 July.
Bonus issue on 1 October: 1 for 5 on 2,400,000 shares gives 480,000 new shares, so 2,880,000 after. Bonus factor = 6/5.
Period 1 January to 30 September, before the bonus: (2,000,000 × 6/12) + (2,400,000 × 3/12) = 1,000,000 + 600,000 = 1,600,000.
Apply the bonus factor: 1,600,000 × 6/5 = 1,920,000.
Period 1 October to 31 December: 2,880,000 × 3/12 = 720,000.
Weighted average shares = 1,920,000 + 720,000 = 2,640,000.
Basic EPS = $540,000 ÷ 2,640,000 = $0.2045, which is 20.5 cents.
Restated 20X4 EPS = 25.0 × 5/6 = 20.83, which is 20.8 cents.

Answer: Basic EPS for 20X5 is 20.5 cents. The restated 20X4 comparative is 20.8 cents.

Example 2

Birch Co has a 31 December 20X5 year end and profit attributable to ordinary shareholders of $420,000. It had 1,000,000 ordinary shares of $1 in issue at 1 January 20X5. On 1 April 20X5 it made a 1 for 4 rights issue at $2.00 per share. The market price just before the issue (cum-rights) was $3.00. Calculate basic EPS for 20X5.

Show the solution

Rights shares issued = 1,000,000 ÷ 4 = 250,000. Total shares after = 1,250,000.
TERP: (4 shares × $3.00 + 1 share × $2.00) ÷ 5 = $14.00 ÷ 5 = $2.80.
Rights factor = cum-rights price ÷ TERP = $3.00 ÷ $2.80.
Period 1 January to 31 March: 1,000,000 × 3/12 × (3.00 ÷ 2.80) = 250,000 × 1.0714 = 267,857.
Period 1 April to 31 December: 1,250,000 × 9/12 = 937,500.
Weighted average shares = 267,857 + 937,500 = 1,205,357.
Basic EPS = $420,000 ÷ 1,205,357 = $0.3484, which is 34.8 cents.

Answer: Basic EPS for 20X5 is 34.8 cents.

Exam tips

Write out the TERP as a block of shares (for example 4 + 1) before dividing. Objective test options often include answers from a wrong TERP or a missing factor.
In a Section A or B objective question, a quick check helps: a bonus or rights issue should make the weighted shares larger than an unadjusted count, so EPS should fall. If your answer rises, look for an error.
In a Section C question, show a clear table of dates, shares, time fractions and factors. Method marks are awarded even if one number is wrong.
Read the earnings line carefully. Look for non-controlling interest and preference dividends, and ignore ordinary dividends.
Link EPS to interpretation. Be ready to comment that EPS can be manipulated by share buy-backs or by changes in accounting policy, and that it ignores the capital invested, so it works best as a trend within one entity.

Practice questions from Reporting financial performance

IAS 33 Earnings Per Share in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

IAS 33 Earnings Per Share: frequently asked questions

What is the difference between a bonus issue and a rights issue in EPS?

A bonus issue gives shares free, so no cash comes in and earlier shares are simply increased by the bonus factor. A rights issue sells shares at a discount to the market price, so part of it is a bonus and part is a full-price issue. You use TERP to deal with the bonus part.

How do I calculate TERP for EPS?

Add the market value of a block of existing shares at the cum-rights price to the cash paid for the new shares in that block. Divide by the total number of shares in the block after the issue. For a 1 for 4 rights issue, use 4 old shares plus 1 new share, giving 5 shares.

Do I need to restate the previous year's EPS?

Yes, for a bonus issue or the bonus element of a rights issue, IAS 33 requires comparatives to be restated. Multiply the old EPS by the inverse of the bonus factor, or by TERP ÷ cum-rights price. A full-price issue does not change the comparative.

Which entities must present EPS under IAS 33?

IAS 33 applies to entities whose ordinary shares or potential ordinary shares are publicly traded, or that are filing to issue them in a public market. Other entities that choose to show EPS must follow the standard.