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CA Final · Financial Reporting · Ind AS 33 Earnings per Share

Ananta Ltd. issued preference shares and the discount on issue is amortised each year. Under Indian law the discount is debited to the securities premium account instead of being charged to profit or loss. For computing basic EPS, how does Ind AS 33 require the discount or premium on such preference shares to be treated?

The discount or premium on preference shares is amortised to retained earnings, irrespective of whether any law requires it to be debited or credited to the securities premium account. It therefore affects the profit attributable to equity holders in basic EPS, so the legal accounting route does not exempt it.

  1. AIgnored, because it is debited to the securities premium account
  2. BAmortised to retained earnings, irrespective of whether it is debited or credited to securities premium account due to any lawCorrect
  3. CAdded back to profit attributable to equity holders
  4. DCharged to other comprehensive income

Explanation

Ind AS 33 paragraph 15 was amended to add that discount or premium on preference shares is amortised to retained earnings irrespective of whether it is debited or credited to securities premium account under any law. Hence it is treated as a preference dividend-like adjustment in arriving at earnings for equity holders. Ignoring it because of the securities premium route is wrong.

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