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

In deciding the order in which several issues of potential ordinary shares enter the diluted EPS calculation, Ind AS 33 requires that:

Each issue or series of potential ordinary shares is tested separately, in sequence from the most dilutive to the least dilutive, meaning lowest earnings per incremental share first. This maximises dilution of basic EPS; options and warrants usually come first since they do not affect the numerator.

  1. AThey are aggregated and tested together as a single block
  2. BThey are considered in sequence from the highest to the lowest earnings per incremental share
  3. CThey are considered separately, from most dilutive (lowest earnings per incremental share) to least dilutiveCorrect
  4. DThey are considered in the chronological order of their issue dates

Explanation

Each issue or series is considered separately, not in aggregate. To maximise dilution, those with the lowest earnings per incremental share are included first. Options and warrants are generally first because they do not affect the numerator. Reversing the order would reduce dilution.

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