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

Ind AS 33 Objective, Scope and Definitions for CMA Inter

Updated 10 October 2026 · Fact-checked

Ind AS 33 prescribes how to determine and present earnings per share so that performance can be compared across entities and periods. Basic EPS uses ordinary shares outstanding. Diluted EPS also adds dilutive potential ordinary shares, adjusting both profit and share count. Anti-dilutive items are left out of diluted EPS.

Understand Ind AS 33 Objective, Scope and Definitions

Earnings per share (EPS) tells you how much profit belongs to each ordinary share. Investors use it to compare companies and years. The objective of Ind AS 33 (para 1) is to prescribe principles for determining and presenting EPS, so that performance comparisons improve between entities in the same period and for the same entity across periods. The Standard says its focus is the denominator, because a consistently determined share count improves reporting even though 'earnings' depend on accounting policies.

Basic EPS (para 11) measures the interest of each ordinary share of the parent in the entity's performance over the reporting period. It looks only at ordinary shares actually outstanding.

Diluted EPS has the same objective but gives effect to all dilutive potential ordinary shares outstanding during the period (para 32). A potential ordinary share is a financial instrument or contract that may entitle its holder to ordinary shares. Common examples are convertible debentures, convertible preference shares, share options and warrants. Terms such as financial instrument and equity instrument carry the meanings in Ind AS 32 (para 8).

Dilution means including the potential shares lowers EPS. Anti-dilution means including them would raise EPS (or reduce a loss per share), so they are excluded. Para 44 says each issue or series is tested separately, and they are taken in order from most dilutive (lowest earnings per incremental share) to least dilutive. Options and warrants usually come first because they do not change the numerator.

On scope: IAS 33 limits itself to entities with publicly traded shares, but Ind AS 33 deletes that wording because applicability of Ind AS is governed by the Companies Act and its Rules. Ind AS 33 also requires EPS information in both consolidated and separate financial statements, whereas IAS 33 allows it in consolidated statements only when both are presented.

Key rules to remember

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.

How to solve Ind AS 33 Objective, Scope and Definitions questions

Use this for any theory or short-note question on Ind AS 33 objective, scope and definitions.

  1. 1State the objective: principles for determining and presenting EPS to improve comparisons between entities and periods, with focus on the denominator.
  2. 2Define basic EPS: the interest of each ordinary share of the parent in performance for the period.
  3. 3Define diluted EPS: same objective, but gives effect to all dilutive potential ordinary shares outstanding.
  4. 4Give examples of potential ordinary shares: convertible debentures, convertible preference shares, options, warrants.
  5. 5Explain dilutive versus anti-dilutive, and that each issue is tested separately, from most to least dilutive.
  6. 6Mention the Indian scope points: applicability governed by the Companies Act and Rules; EPS in both consolidated and separate statements.
  7. 7If numbers are given, compute basic EPS, then test each instrument's earnings per incremental share against the running EPS.

Quickest way: Dilution test in one line

When to use it: When an MCQ asks whether a convertible instrument is dilutive or anti-dilutive.

  1. Compute basic EPS.
  2. Compute earnings per incremental share: after-tax interest or dividend saved ÷ shares on conversion.
  3. If it is lower than basic EPS, the instrument is dilutive and included; if higher, it is anti-dilutive and excluded.
  4. For options and warrants, there is no numerator change, so any net additional shares dilute.

Common mistakes in Ind AS 33 Objective, Scope and Definitions

  • Calling every convertible instrument dilutive.

    Students assume more shares always means lower EPS.

    Fix: Compare earnings per incremental share with EPS before the instrument. Exclude it if it is higher.

  • Adding back interest without deducting tax.

    Students forget para 32(a) says the after-tax amount.

    Fix: Always add back interest net of tax, e.g. interest × (1 − tax rate).

  • Testing all potential shares together.

    Aggregating seems simpler.

    Fix: Para 44 requires each issue or series to be considered separately, ranked from most to least dilutive.

  • Saying Ind AS 33 applies only to listed entities in its text.

    Students recall IAS 33 scope wording.

    Fix: Ind AS 33 deletes that wording; applicability is governed by the Companies Act and Rules.

  • Treating partly paid shares as fully paid ordinary shares in diluted EPS.

    They are counted as shares issued.

    Fix: To the extent they do not participate in dividends, treat them like warrants: subscribed shares less shares assumed purchased from the unpaid balance.

Worked examples

Example 1

Aarav Ltd has profit attributable to ordinary shareholders of ₹10,00,000 and 1,00,000 ordinary shares outstanding throughout the year. It also has 10% convertible debentures of ₹5,00,000 convertible into 20,000 ordinary shares. Tax rate is 25%. Check whether the debentures are dilutive.

Show the solution
  1. Basic EPS = ₹10,00,000 ÷ 1,00,000 = ₹10.00.
  2. Interest = 10% × ₹5,00,000 = ₹50,000. After tax = ₹50,000 × (1 − 0.25) = ₹37,500.
  3. Earnings per incremental share = ₹37,500 ÷ 20,000 = ₹1.875.
  4. ₹1.875 is below ₹10.00, so the debentures are dilutive.
  5. Adjusted profit = ₹10,00,000 + ₹37,500 = ₹10,37,500. Adjusted shares = 1,00,000 + 20,000 = 1,20,000.
  6. Diluted EPS = ₹10,37,500 ÷ 1,20,000 = ₹8.65 (approx.).

Answer: The debentures are dilutive. Basic EPS is ₹10.00 and diluted EPS is about ₹8.65.

Example 2

Write a short note on the objective of Ind AS 33 and on how Ind AS 33 differs from IAS 33 in scope.

Show the solution
  1. Objective: Ind AS 33 prescribes principles for determining and presenting EPS to improve performance comparisons between different entities in the same period and for the same entity across periods.
  2. Focus: the Standard concentrates on the denominator; a consistently determined denominator enhances reporting despite differing policies on 'earnings'.
  3. Scope difference 1: IAS 33 applies to entities with publicly traded or to-be-traded ordinary shares. Ind AS 33 deletes this wording because applicability is governed by the Companies Act and Rules.
  4. Scope difference 2: IAS 33 lets an entity give EPS in consolidated statements only when it presents both consolidated and separate statements. Ind AS 33 requires EPS in both.
  5. Other difference: Ind AS 33 requires items of income or expense debited or credited to securities premium or other reserves, though required to go through profit or loss, to be deducted from profit from continuing operations for basic EPS.

Answer: Ind AS 33 aims at comparable EPS, focusing on the denominator. It differs from IAS 33 by dropping the public-market scope wording, requiring EPS in both consolidated and separate statements, and adding the reserves-adjustment rule for basic EPS.

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.

Practice questions from Earnings per Share (Ind AS 33)

Ind AS 33 Objective, Scope and Definitions in other exams

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

Ind AS 33 Objective, Scope and Definitions: frequently asked questions

What are potential ordinary shares in Ind AS 33?

They are financial instruments or contracts that may entitle the holder to ordinary shares, such as convertible debentures, convertible preference shares, options and warrants. They enter diluted EPS only if they are dilutive.

What is the difference between basic and diluted EPS?

Basic EPS uses profit and the weighted average ordinary shares outstanding. Diluted EPS adjusts profit for after-tax dividends and interest on dilutive potential shares and adds the extra shares from assumed conversion.

What is anti-dilution?

An instrument is anti-dilutive when including it would raise EPS or reduce loss per share. It is excluded from diluted EPS. Each issue is tested separately, from most to least dilutive.

Is EPS required in both consolidated and separate statements?

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