Financial Reporting · Ind AS 33 Earnings per Share

Bonus Issue, Rights Issue and Share Splits in EPS (Ind AS 33)

Updated 5 October 2026 · Fact-checked

Under Ind AS 33, a bonus issue, share split or rights issue with a bonus element changes the share count without a matching change in resources. You adjust the weighted average shares as if the change happened at the start of the earliest period presented, and restate prior-period EPS. For rights issues, use the bonus factor.

Understand Bonus Issue, Rights Issue and Share Splits in EPS

EPS is profit divided by weighted average equity shares. The weighted average normally gives credit for shares only from the date the company receives the money. A new share issued for cash on 1 October counts for six months of the year.

Some events add shares but bring in no extra resources. A bonus issue capitalises reserves into shares. A share split cuts the face value and multiplies the number of shares. A consolidation does the opposite. Owners hold the same value of the company before and after, so the shares do not deserve a time weighting. If you weighted them, EPS would fall for the wrong reason and be incomparable across years.

The fix is to treat the new shares as if they had always existed. Ind AS 33 requires the number of shares outstanding before the event to be adjusted for the proportionate change, as if the event had happened at the beginning of the earliest period presented. This restates the current year and all comparative periods. It also applies if the bonus or split happens after the reporting date but before the financial statements are approved for issue. In that case you restate and disclose that fact.

A rights issue is a mix. If shares are offered to existing holders at a price below fair value, part of the issue is like a bonus and part is like a normal cash issue. The free part is the bonus element. You measure it using the theoretical ex-rights fair value per share (TERP). The bonus factor is the fair value just before the rights are exercised divided by TERP. It is above 1 whenever the issue price is below fair value.

If a rights issue is made at full fair value, there is no bonus element. Treat it as an ordinary cash issue and weight shares from the date the consideration is receivable.

Key rules to remember

Bonus issue or split adjustment factor: Factor = Shares after the event ÷ Shares before the event; Example: bonus 1 for 2 gives 1.5. A 1:5 split of face value gives 5. Apply it to all shares outstanding before the event, for every period presented.
Theoretical ex-rights fair value per share (TERP): TERP = (Fair value of all shares before exercise + Proceeds from exercise) ÷ (Shares before exercise + Shares issued in the rights issue); Fair value before exercise is the closing price on the last day the shares trade together with the rights, where rights trade separately.
Bonus factor for a rights issue: Factor = Fair value per share immediately before exercise ÷ TERP; Use only if the issue price is below fair value. If there is no bonus element, the factor is 1.
Weighted average shares in the rights year: (Shares before rights × Factor × Fraction of year before exercise) + (Shares after rights × Fraction of year after exercise); Only the pre-rights shares get the factor. Post-rights shares are counted at actual numbers.
Restated EPS of the prior period (rights issue): Restated EPS = Previously reported EPS ÷ Factor; Equivalent to reported EPS × TERP ÷ Fair value before exercise. For a bonus or split, divide by the bonus or split factor.
Basic EPS: Basic EPS = Profit attributable to ordinary equity holders ÷ Weighted average ordinary shares; The numerator does not change because of a bonus, split or rights issue. Only the denominator is adjusted.

How to solve Bonus Issue, Rights Issue and Share Splits in EPS questions

Use this order for any bonus, split or rights question. It keeps the timeline, the factor and the restatement separate, so you do not lose marks on one slip.

1Write the timeline: opening shares, date and type of each issue, and the year-end. Mark each event as cash at fair value, bonus, split, or rights below fair value.
2Classify each event. Bonus, split and consolidation need no time weighting. A cash issue at fair value is weighted from the date consideration is receivable. A rights issue needs the TERP test.
3For a rights issue, compute TERP using total fair value before exercise plus proceeds, divided by total shares after. Then compute the factor as fair value before exercise ÷ TERP.
4Compute the current-year weighted average shares. Apply the factor to shares existing before the event for the pre-event fraction of the year. Add post-event shares for the post-event fraction.
5For a bonus or split, multiply all shares outstanding before the event by the factor. Do this for every period presented, as if it occurred at the start of the earliest period.
6Divide the profit by the adjusted weighted shares to get the current EPS. The profit stays the same.
7Restate the prior-period EPS: divide the reported EPS by the factor, or recompute with the adjusted shares. Show both clearly.
8State the conclusion in one line: events with no change in resources are retrospective, and EPS of all periods presented is restated. Disclose if the event happened after the reporting date.

Quickest way: Factor-on-old-shares shortcut

When to use it: Use this when the question gives you an issue date, ratio and price, and asks for current-year and restated prior-year EPS in a few minutes.

Bonus or split: new total ÷ old total is your factor. Multiply every pre-event share count by it, in both years. Do not time-weight the bonus shares.
Rights: compute TERP in one line. Factor = cum-rights price ÷ TERP.
Current weighted shares = old shares × factor × months before ÷ 12 + new total shares × months after ÷ 12.
Prior-year EPS = reported EPS ÷ factor. This avoids recomputing the prior-year weighted shares.
Check the sense of the answer: restated EPS must be lower than reported EPS whenever a bonus element exists.

Common mistakes in Bonus Issue, Rights Issue and Share Splits in EPS

Time-weighting bonus shares from the bonus date
Students treat every new share like a cash issue and weight it from the issue date.
Fix: Bonus and split shares carry no extra resources. Adjust as if they existed from the start of the earliest period presented.
Forgetting to restate the prior year's EPS
Students compute only the current year and leave the comparative unchanged.
Fix: Always show restated comparatives. Divide the previous EPS by the factor, or recompute with the adjusted shares.
Using the rights issue price instead of the fair value before exercise in the factor
The issue price is the first number in the question, so it gets used.
Fix: Factor = fair value immediately before exercise ÷ TERP. The issue price enters only inside the TERP calculation, as part of the proceeds.
Applying the bonus factor to the post-rights shares as well
Students multiply the whole share count by the factor.
Fix: Apply the factor only to the shares existing before the rights issue, and only for the period before it. Post-rights shares are counted at actual numbers.
Computing TERP with only the new shares
Students divide proceeds by rights shares, or ignore the old shares' fair value.
Fix: Use total fair value of all pre-issue shares plus total proceeds, divided by total shares after the issue.
Ignoring a bonus issue made after the reporting date
Students think post-balance sheet events do not change the current numbers.
Fix: If the bonus, split or consolidation occurs before the financial statements are approved for issue, per-share figures for all periods presented are adjusted, and the fact is disclosed.

Worked examples

Example 1

Case: Meru Components Ltd had 1,00,000 equity shares on 1 April 2025. Its profit for 2025-26 was ₹4,50,000, and the reported EPS was ₹4.50. On 1 October 2026 it issued 20,000 shares for cash at fair value. On 1 February 2027 it issued bonus shares in the ratio 1 for 2. Profit for 2026-27 is ₹6,00,000. Compute the basic EPS for 2026-27 and the restated EPS for 2025-26.

Show the solution

Classify the events. The 1 October issue is a cash issue at fair value, so it is time-weighted. The bonus issue has no change in resources, so it is applied retrospectively.
Bonus factor = 1.5, since each 2 shares become 3.
Weighted shares before bonus, 2026-27: 1,00,000 × 6/12 + 1,20,000 × 6/12 = 50,000 + 60,000 = 1,10,000.
Adjust for the bonus: 1,10,000 × 1.5 = 1,65,000 shares. Cross-check: 1,00,000 × 1.5 × 6/12 = 75,000, plus 1,80,000 × 6/12 = 90,000, which gives 1,65,000.
EPS 2026-27 = ₹6,00,000 ÷ 1,65,000 = ₹3.64 (rounded).
Restate 2025-26: shares = 1,00,000 × 1.5 = 1,50,000. EPS = ₹4,50,000 ÷ 1,50,000 = ₹3.00. Cross-check: ₹4.50 ÷ 1.5 = ₹3.00.

Answer: Basic EPS for 2026-27 is ₹3.64. Restated EPS for 2025-26 is ₹3.00 against the ₹4.50 reported earlier.

Example 2

Case: Kaveri Foods Ltd has 5,00,000 equity shares. On 1 October 2026 it makes a rights issue of 1 share for every 5 held at ₹40 per share. The closing market price on the last day the shares traded cum-rights was ₹64. The year ends on 31 March 2027. Profit for 2026-27 is ₹12,00,000. Profit for 2025-26 was ₹9,00,000, and the EPS then reported was ₹1.80. Compute the 2026-27 EPS and the restated 2025-26 EPS.

Show the solution

Rights shares = 5,00,000 ÷ 5 = 1,00,000. Proceeds = 1,00,000 × ₹40 = ₹40,00,000. Shares after = 6,00,000.
TERP = (5,00,000 × ₹64 + ₹40,00,000) ÷ 6,00,000 = (₹3,20,00,000 + ₹40,00,000) ÷ 6,00,000 = ₹3,60,00,000 ÷ 6,00,000 = ₹60.
The issue price is below fair value, so there is a bonus element. Factor = 64 ÷ 60 = 1.0667.
Weighted shares 2026-27 = 5,00,000 × (64/60) × 6/12 + 6,00,000 × 6/12 = 2,66,667 + 3,00,000 = 5,66,667 (rounded).
EPS 2026-27 = ₹12,00,000 ÷ 5,66,667 = ₹2.12 (rounded).
Restated EPS 2025-26 = ₹1.80 ÷ (64/60) = ₹1.80 × 60/64 = ₹1.6875, which is ₹1.69 rounded. Cross-check: ₹9,00,000 ÷ (5,00,000 × 64/60 = 5,33,333) = ₹1.6875.

Answer: EPS for 2026-27 is ₹2.12. The restated EPS for 2025-26 is ₹1.69.

Exam tips

Write the factor and TERP as separate labelled lines. Even if the final figure is off, you earn the method marks.
Always show the comparative column. Examiners give a separate mark for restating the prior period, and many students skip it.
Read the wording for who gets the issue. If the shares go to all existing holders below fair value, test for a bonus element. If they are at full fair value to the public, weight them from the issue date.
Check the date a bonus or split occurs. If it falls after the reporting date but before approval of the financial statements, adjust and add a disclosure note.
In MCQs, use the sense check first: with a bonus element, restated prior EPS must be lower than previously reported EPS, and the current EPS uses more shares than the plain time-weighted count.

Practice questions from Ind AS 33 Earnings per Share

Bonus Issue, Rights Issue and Share Splits in EPS in other exams

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

Bonus Issue, Rights Issue and Share Splits in EPS: frequently asked questions

Why are bonus shares not time-weighted in EPS?

A bonus issue brings in no new resources, so the company earns no extra profit from it. Weighting by time would make EPS drop only because of the timing of a paper entry. Ind AS 33 therefore adjusts as if the shares existed from the beginning of the earliest period presented.

What is the bonus element in a rights issue?

It is the discount of the rights price against the fair value of the share. That discount is a free benefit to existing holders, like a bonus issue. You measure it with the bonus factor, which is the fair value before exercise divided by TERP.

How do I restate the previous period's EPS for a rights issue?

Divide the previously reported EPS by the bonus factor. This is the same as multiplying it by TERP and dividing by the fair value before exercise. You can also recompute using the previous-year shares multiplied by the factor.

Is a share split treated differently from a bonus issue in EPS?

No. Both increase the number of shares without any change in resources, so both are adjusted retrospectively using the ratio of new shares to old shares. A consolidation works the same way, but the factor is below 1.

What if the bonus issue happens after the year-end but before the accounts are approved?

You still adjust the basic and diluted EPS of the current and all prior periods presented, as if the event had occurred at the start of the earliest period. You also disclose the fact that per-share calculations reflect the change.