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CA Intermediate · Advanced Accounting · AS 20 Earnings Per Share

Kaveri Foods Ltd (year ended 31 March) had 2,00,000 equity shares on 1 April. On 1 October it issued 40,000 fully paid shares at full market price. After the year-end but before the financial statements were approved, it announced a bonus issue of 1 share for every 4 held. Net profit for the year is ₹11,00,000. What is the basic EPS to be reported for the year?

Basic EPS is ₹4.00. A bonus issue after the year-end but before approval of the accounts is applied retrospectively. Weighted shares of 2,20,000 become 2,75,000 after the 1:4 bonus, and ₹11,00,000 divided by 2,75,000 gives ₹4.00.

  1. A₹4.00Correct
  2. B₹5.00
  3. C₹4.40
  4. D₹4.58

Explanation

A bonus issue after the balance sheet date but before approval requires restating EPS as if it had occurred at the start of the period. Weighted shares before bonus = 2,00,000 + 40,000 × 6/12 = 2,20,000. Adjusting for the 1:4 bonus gives 2,20,000 × 1.25 = 2,75,000. EPS = 11,00,000 ÷ 2,75,000 = ₹4.00. ₹5.00 ignores the bonus entirely.

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