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

Sagar Foods Ltd issued preference shares at a discount, and the discount is amortised over the period. The company's legal advisers note that under company law the discount is debited to the securities premium account. For computing basic EPS, how should the amortisation of the discount be treated under Ind AS 33?

The discount amortisation is treated as a charge to retained earnings and deducted when arriving at profit attributable to ordinary equity holders. Ind AS 33 paragraph 15 clarifies this applies irrespective of whether law requires the discount to be debited to securities premium account.

  1. AIgnored, because it is debited to securities premium as per law
  2. BTreated as a deduction from profit only if the preference shares are cumulative
  3. CTreated as an adjustment to retained earnings, deducted in arriving at profit attributable to equity holders, irrespective of the securities premium treatmentCorrect
  4. DAdded back to profit attributable to equity holders

Explanation

Paragraph 15 of Ind AS 33 was amended to state that the discount or premium on preference shares is amortised to retained earnings irrespective of whether it is debited or credited to securities premium under law. It is therefore treated as a preference dividend-type amount and deducted in arriving at profit attributable to equity holders. Ignoring it because of the legal route is wrong.

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