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

Narmada Infra Ltd issued preference shares at a discount, and the discount is amortised over the term of the shares. The company's law requires the discount to be debited to securities premium account rather than profit or loss. For computing earnings attributable to ordinary equity holders under Ind AS 33, how should the amortisation of this discount be treated?

The discount amortisation is treated as amortised to retained earnings, whatever the legal debit to securities premium, and it reduces earnings attributable to ordinary equity holders. Ind AS 33 paragraph 15 was amended to say so, so ignoring it because of the securities premium debit is wrong.

  1. AIgnored because it was debited to securities premium account
  2. BAmortised to retained earnings, irrespective of the securities premium debit, and treated as a deduction in arriving at earnings for ordinary shareholdersCorrect
  3. CAdded back to profit as a non-cash item
  4. DCharged only to other comprehensive income

Explanation

Paragraph 15 of Ind AS 33 was amended to state that 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. The amortisation therefore reduces earnings attributable to ordinary shareholders. Ignoring it, as in the first option, contradicts this clarification.

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