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CMA Intermediate · Corporate Accounting and Auditing

Earnings per Share (Ind AS 33) for CMA Intermediate

Earnings per share under Ind AS 33 measures the interest of each ordinary share in the entity's performance. Basic EPS = profit attributable to ordinary equity holders of the parent ÷ weighted average ordinary shares outstanding. Diluted EPS adds the effect of dilutive potential ordinary shares. Adjust shares for bonus, split and rights issues, then present the result.

What this chapter covers

This chapter teaches you to compute and present one number: earnings per share. Ind AS 33 gives two versions. Basic EPS divides profit or loss attributable to ordinary equity holders of the parent (the numerator) by the weighted average number of ordinary shares outstanding during the period (the denominator). Diluted EPS keeps the same objective but gives effect to all dilutive potential ordinary shares outstanding during the period.

Most questions are numerical. You work out the numerator, build a time-weighted share count, adjust for events that change shares without changing resources (bonus issue, share split, reverse split, and the bonus element in a rights issue), and then test convertibles, options and warrants for dilution. The standard also requires retrospective restatement of earlier periods' EPS when such changes occur.

The chapter links to the rest of Corporate Accounting and Auditing. The profit figure comes from the statement of profit and loss, and share capital movements come from company accounts prepared under Schedule III. Convertible instruments and preference shares connect to your capital-structure topics. Ind AS 33 also needs EPS in both consolidated and separate financial statements.

EPS is a compact chapter with a clear method, so careful practice converts directly into marks. It suits both the compulsory MCQ section, where one weighted-average or rights-factor calculation can be a quick 2 marks, and the 14-mark written questions, where a neat working note earns step marks even if one figure slips. The same logic of adjusting for bonus, split and rights issues and testing for dilution repeats in almost every question, so mastering the method once covers many variants.

Earnings per Share (Ind AS 33): topics in the order to study them

  1. 1Ind AS 33 Objective, Scope and DefinitionsStart here so you know what basic and diluted EPS are meant to measure and the terms (ordinary share, potential ordinary share) used in every later step.
  2. 2Basic EPS Calculation and Earnings NumeratorBasic EPS is the base formula; you must be able to build the numerator and the time-weighted share count before adjusting anything.
  3. 3Bonus Issue, Share Split and Rights Issue AdjustmentsThese change the share count without a matching change in resources, so they modify the denominator you learned in basic EPS and need the rights factor.
  4. 4Diluted EPS and Potential Ordinary SharesDiluted EPS builds on a correct basic EPS and adds the numerator and denominator adjustments plus the dilutive versus antidilutive test.
  5. 5Presentation, Disclosure and RestatementFinish with how results are presented, what is disclosed and how earlier periods are restated, which ties the calculations together.

How to prepare Earnings per Share (Ind AS 33)

Treat this chapter as a method you repeat, not facts you memorise. Build it layer by layer and always show workings.

  1. Learn the two definitions word for word in your own language: basic EPS numerator and denominator, and what diluted EPS adds to each.
  2. Practise the numerator: start with profit attributable to ordinary equity holders of the parent, and handle preference dividends and other claims before dividing.
  3. Practise weighted average shares with a timeline. Write each share movement, the months outstanding, and the weight as a fraction of the year.
  4. Learn the rights issue method: compute the theoretical ex-rights fair value per share, then the factor = fair value before exercise ÷ theoretical ex-rights fair value, and apply it to shares before the issue.
  5. For diluted EPS, treat each potential ordinary share separately, rank by earnings per incremental share from lowest to highest, and include one only if it reduces EPS.
  6. Write full answers in a standard layout: working note for numerator, working note for weighted shares, basic EPS, diluted adjustments, final EPS, and a line stating restatement or disclosure where relevant.
  7. Finish with timed MCQs on bonus factors, ex-rights value and dilution tests, then one full 14-mark question under exam time.

Common mistakes in Earnings per Share (Ind AS 33)

  • Using the closing number of shares instead of the weighted average.

    Fix: Always draw a timeline and weight each share movement by the period it was outstanding.

  • Applying the bonus or rights adjustment only to the current year.

    Fix: Restate the comparative EPS using the new share number or the rights factor, and note that the figures reflect the change.

  • Applying the rights factor to the wrong share count, or confusing market price with theoretical ex-rights value.

    Fix: Compute theoretical ex-rights fair value first, then divide the fair value before exercise by it, and apply the factor only to shares outstanding before the issue.

  • Including every convertible in diluted EPS without testing.

    Fix: Check each instrument separately by its earnings per incremental share and exclude any that would increase EPS.

  • Forgetting the after-tax interest or dividend add-back when a convertible is assumed converted.

    Fix: Whenever you add shares for a convertible, adjust the numerator for the related after-tax interest or dividend and any other income or expense changes.

  • Adjusting EPS for share issues that occurred after the reporting period for cash.

    Fix: Remember that bonus, split and reverse split after the period but before approval do restate EPS, while issues for cash or conversions after the period do not.

Last-day revision: Earnings per Share (Ind AS 33)

  • 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.

Earnings per Share (Ind AS 33) practice questions

Earnings per Share (Ind AS 33) in other exams

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

Earnings per Share (Ind AS 33): frequently asked questions

What is the formula for basic EPS under Ind AS 33?

Basic EPS is profit or loss attributable to ordinary equity holders of the parent divided by the weighted average number of ordinary shares outstanding during the period. Both parts need care: the numerator must be after claims that do not belong to ordinary holders, and the denominator must be time-weighted.

How do I handle a rights issue in EPS questions?

A rights issue usually has a bonus element because the exercise price is below fair value. Calculate the theoretical ex-rights fair value, then the factor of fair value before exercise to that value, and multiply shares outstanding before the issue by the factor for periods before the rights issue.

When is a potential ordinary share left out of diluted EPS?

It is left out when it is antidilutive, meaning conversion would increase EPS or decrease loss per share from continuing operations. Test each issue separately, ranking from lowest to highest earnings per incremental share.

Do I need to restate earlier years' EPS?

Yes, when shares increase through a bonus issue or share split, or decrease through a reverse split, EPS for all periods presented is adjusted retrospectively. The same applies for such changes after the reporting period but before approval. You should also disclose that the per share figures reflect the change.

Is EPS given for both consolidated and separate statements?

Yes. Ind AS 33 requires EPS information in both consolidated and separate financial statements, unlike IAS 33, which allows it in the consolidated statements only when both are presented.