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CA Intermediate · Advanced Accounting · AS 20 Earnings Per Share

Himalaya Pharma Ltd had 1,50,000 equity shares of ₹10 each throughout the current year and 1,00,000 shares in the previous year. After the balance sheet date but before the financial statements were approved, each ₹10 share was split into five shares of ₹2 each. Current-year profit is ₹12,00,000 and previous-year profit was ₹6,00,000. What EPS should be reported for the current year and the restated previous year?

Current EPS is ₹1.60 and the restated previous-year EPS is ₹1.20. A share split, even after the year end but before approval of the accounts, is applied to all periods presented, so shares become 7,50,000 and 5,00,000 respectively.

  1. ACurrent ₹1.60; previous ₹1.20Correct
  2. BCurrent ₹8.00; previous ₹6.00
  3. CCurrent ₹1.60; previous ₹6.00
  4. DCurrent ₹8.00; previous ₹1.20

Explanation

A share split after the balance sheet date but before approval requires EPS for all periods presented to be based on the new number of shares. Current shares = 1,50,000 × 5 = 7,50,000, so EPS = 12,00,000 ÷ 7,50,000 = ₹1.60. Previous shares = 5,00,000, so EPS = 6,00,000 ÷ 5,00,000 = ₹1.20. Using old share counts gives ₹8.00 and ₹6.00.

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