Corporate Accounting and Auditing · Earnings per Share (Ind AS 33)

Bonus Issue, Share Split and Rights Issue Adjustments in EPS

Updated 10 October 2026 · Fact-checked

Under Ind AS 33, a bonus issue or share split changes the number of shares without changing resources, so you restate EPS for all periods as if it happened at the start of the earliest period. A rights issue has a bonus element, adjusted using the factor: fair value before rights ÷ theoretical ex-rights fair value.

Understand Bonus Issue, Share Split and Rights Issue Adjustments

EPS divides profit by the number of shares. If shares increase without any new money coming in, EPS falls only because of the arithmetic, not because the business did worse. To keep years comparable, Ind AS 33 adjusts the share count.

Paragraph 27 lists the cases where shares change without a corresponding change in resources: a bonus issue, a bonus element in a rights issue, a share split and a reverse share split (consolidation). For a bonus issue or split, shares go to existing holders for no consideration. So you adjust the shares outstanding before the event as if it had occurred at the beginning of the earliest period presented (paragraph 28). Paragraph 64 requires this retrospective adjustment for all periods presented. It also applies if the event happens after the reporting date but before the financial statements are approved. Then you must disclose that the per share figures reflect the change.

A rights issue is mixed. Shares are usually offered below fair value. Part of the issue is a normal issue for cash and part is a free bonus. Only the bonus part is adjusted retrospectively. For this you compute the theoretical ex-rights fair value per share (TERP): the aggregate fair value of shares before the rights plus the proceeds from the rights, divided by the number of shares after the rights. The ratio of fair value before the rights to TERP is the adjustment factor. Multiply the shares outstanding before the issue, for all periods before the rights issue, by this factor (paragraph A2).

Note that a bonus or split does not use time weighting from its date. The new shares are treated as outstanding from the start. Cash shares in a rights issue are weighted from the date of the issue, as in paragraph 20.

A consolidation normally reduces shares without reducing resources, so it is adjusted retrospectively. If it is combined with a special dividend and the overall effect is a buy-back at fair value, the reduction is weighted from the date the special dividend is recognised (paragraph 29).

Key rules to remember

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.

How to solve Bonus Issue, Share Split and Rights Issue Adjustments questions

Follow this order for any question mixing bonus, split or rights events.

1List the events in date order: opening shares, rights issue, bonus issue, split, buy-back.
2Decide the type of each event: bonus, split and consolidation are retrospective with no time weighting; a rights issue has a bonus element plus a cash element.
3For a rights issue, compute TERP = (fair value before × shares before + proceeds) ÷ shares after, then the factor = fair value before ÷ TERP.
4Build the weighted average share count for each year, applying the factor to shares before the rights issue and time weighting to new shares from the issue date.
5Apply any later bonus or split multiplier to every period presented, including earlier years and the year of the event.
6Divide the earnings attributable to ordinary shareholders by the weighted average for each period, restating the prior-year EPS.
7Disclose that per share figures reflect the change in the number of shares where the event occurred after the reporting date.

Quickest way: Factor first, then weight

When to use it: Use when the question asks for current year EPS and restated prior year EPS after a rights issue or bonus.

Compute TERP and the factor in one line before touching the timeline.
Restated prior-year EPS = original EPS ÷ factor (when only a rights issue occurs, and shares in the prior year did not change).
Current year weighted shares = opening × factor × fraction before issue + closing × fraction after issue.
For a bonus or split, simply multiply opening shares and every earlier weighted figure by the multiplier; do not weight the bonus shares.
Sanity check: EPS must fall after a bonus, split or below-market rights issue.

Common mistakes in Bonus Issue, Share Split and Rights Issue Adjustments

Time-weighting bonus shares from the date of issue
Students treat them like cash shares.
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
The rights price is the number stated most prominently in the question.
Fix: The factor is fair value just before the rights ÷ TERP. The rights price enters only through the proceeds in TERP.
Dividing TERP by the wrong share count
Students use shares before the rights issue.
Fix: Divide total value (old shares at fair value plus proceeds) by shares after the rights issue.
Not restating prior-year EPS
Students compute only the current year.
Fix: Paragraph 64 requires retrospective adjustment for all periods presented. Show restated comparatives.
Applying the rights factor to post-issue shares
The factor is applied to the whole count.
Fix: Apply it only to shares outstanding before the rights issue. Post-issue shares are the actual shares, time weighted.
Treating every consolidation as retrospective
The special dividend exception is forgotten.
Fix: If a consolidation is combined with a special dividend and works like a buy-back at fair value, adjust from the date the dividend is recognised (paragraph 29).

Worked examples

Example 1

Shine Ltd had 10,00,000 equity shares on 1 April 2025. On 1 October 2025 it made a rights issue of 1 share for every 5 held at ₹100 per share. The fair value of a share immediately before the exercise was ₹160. Profit for 2025-26 was ₹1,76,00,000 and for 2024-25 was ₹1,60,00,000 (EPS reported earlier: ₹16). Compute EPS for 2025-26 and the restated EPS for 2024-25.

Show the solution

Rights shares = 10,00,000 ÷ 5 = 2,00,000. Proceeds = 2,00,000 × ₹100 = ₹2,00,00,000. Shares after = 12,00,000.
Value before = 10,00,000 × ₹160 = ₹16,00,00,000.
TERP = (16,00,00,000 + 2,00,00,000) ÷ 12,00,000 = ₹150.
Factor = 160 ÷ 150 = 1.0667 (16/15).
Weighted shares 2025-26: 10,00,000 × 16/15 × 6/12 = 5,33,333; plus 12,00,000 × 6/12 = 6,00,000. Total = 11,33,333.
EPS 2025-26 = 1,76,00,000 ÷ 11,33,333 = ₹15.53.
Restated shares 2024-25 = 10,00,000 × 16/15 = 10,66,667. Restated EPS = 1,60,00,000 ÷ 10,66,667 = ₹15.00.

Answer: EPS for 2025-26 is about ₹15.53 and restated EPS for 2024-25 is ₹15.00.

Example 2

Kaveri Ltd had 6,00,000 equity shares on 1 April 2025. On 1 January 2026 it issued 1 bonus share for every 2 held. Profit attributable to equity shareholders: 2025-26 ₹33,00,000; 2024-25 ₹24,00,000. No other share changes. Compute EPS for both years as presented in the 2025-26 financial statements.

Show the solution

Bonus shares = 6,00,000 ÷ 2 = 3,00,000. Total shares = 9,00,000. Multiplier = 1.5.
Bonus shares are treated as outstanding from the start of the earliest period presented, so no time weighting.
Weighted shares 2025-26 = 9,00,000.
EPS 2025-26 = 33,00,000 ÷ 9,00,000 = ₹3.67.
Weighted shares 2024-25 restated = 6,00,000 × 1.5 = 9,00,000.
Restated EPS 2024-25 = 24,00,000 ÷ 9,00,000 = ₹2.67.

Answer: EPS is about ₹3.67 for 2025-26 and the restated comparative EPS is about ₹2.67 for 2024-25.

Exam tips

Write TERP and the factor as separate lines. Step marks are usually given for each.
Show the restated prior-year EPS clearly; the examiner often asks for it.
Check whether the question gives fair value 'cum-rights' or 'ex-rights'. Use the value just before the rights.
State the paragraph reasoning briefly: bonus and split are retrospective with no time weighting.
For MCQs, remember that a bonus, split or below-market rights issue always lowers EPS and the restated comparative.

Practice questions from Earnings per Share (Ind AS 33)

Bonus Issue, Share Split and Rights Issue Adjustments 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, Share Split and Rights Issue Adjustments: frequently asked questions

What is the bonus element in a rights issue?

Rights are usually offered below fair value, so part of the issue is effectively free to existing holders. Ind AS 33 treats this part as a bonus element and adjusts earlier periods using the ratio of fair value before the rights to TERP.

How do I calculate TERP?

Add the aggregate fair value of shares before the rights to the money raised from the rights. Divide by the number of shares outstanding after the rights issue.

Is EPS restated for a bonus issue made after the year end?

Yes. If the bonus issue occurs after the reporting period but before the financial statements are approved, per share figures for that and earlier periods use the new number of shares, and you disclose this fact.

Does a share split change earnings per share?

It reduces EPS in proportion to the split, because the number of shares rises with no change in resources. EPS of all periods presented is restated retrospectively so comparisons stay fair.