Skip to content

CMA Intermediate · Corporate Accounting and Auditing · Earnings per Share (Ind AS 33)

Under Ind AS 33, which adjustment is made to the numerator when calculating diluted EPS for a dilutive convertible debenture?

Profit attributable to ordinary equity holders is increased by the after-tax amount of interest recognised on the convertible debentures, because conversion would remove that interest cost. Other changes in income or expense from conversion are also adjusted. Pre-tax interest is not used.

  1. AProfit attributable to ordinary equity holders is increased by the after-tax amount of interest recognised on the debenturesCorrect
  2. BProfit attributable to ordinary equity holders is increased by the full pre-tax interest on the debentures
  3. CProfit attributable to ordinary equity holders is reduced by the after-tax interest on the debentures
  4. DNo adjustment is made to the numerator; only the share count changes

Explanation

Ind AS 33 requires profit to be increased by the after-tax amount of dividends and interest recognised in respect of dilutive potential ordinary shares, plus other income or expense changes from conversion. Using the pre-tax interest ignores the tax effect, so it is wrong.

Did you get it right without looking?

One question tells you little. A timed set on Earnings per Share (Ind AS 33) shows your real accuracy, how long you take and where you lose marks.

Practise Earnings per Share (Ind AS 33)Free diagnostic mock

More Earnings per Share (Ind AS 33) questions