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

Kaveri Textiles Ltd issued preference shares at a discount, and the discount is amortised each year. Under Ind AS 33, how is the amortisation of this discount treated when computing profit attributable to ordinary equity holders for basic EPS, where the company debits the discount against securities premium account as required by law?

The amortisation is treated as a preference dividend adjustment in arriving at profit attributable to ordinary equity holders. Ind AS 33 clarifies that the discount or premium is amortised to retained earnings regardless of whether law requires it to be debited or credited to securities premium account.

  1. AIt is ignored because it is debited to securities premium and not to profit or loss
  2. BIt is treated as a deduction from profit only if the preference shares are cumulative
  3. CIt is added back to profit as a non-cash item
  4. DIt is treated as a preference dividend adjustment, amortised to retained earnings irrespective of whether it is debited to securities premium account under lawCorrect

Explanation

Ind AS 33 paragraph 15 was amended to add that the 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. So it is dealt with like a preference dividend adjustment. Ignoring it because of the securities premium debit is the key error.

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