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CA Intermediate · Advanced Accounting · AS 20 Earnings Per Share

Veda Textiles Ltd reported a net loss of ₹12,00,000 for the year ended 31 March 2026. It has 6,00,000 equity shares outstanding all year and also has 10% convertible debentures that would convert into 1,00,000 equity shares. Conversion would save post-tax interest of ₹70,000. What is the diluted loss per share to be reported?

The diluted loss per share is ₹2.00, the same as basic. Converting the debentures would reduce the loss per share, making them anti-dilutive, and AS 20 says potential equity shares are considered dilutive only if they increase loss per share. So they are ignored.

  1. A₹2.00 loss per share, the same as basic loss per shareCorrect
  2. B₹1.57 loss per share, computed after adding back interest and adding the conversion shares
  3. C₹1.71 loss per share, computed by adding the conversion shares only
  4. D₹1.86 loss per share, computed by adding back the interest only

Explanation

Basic loss per share is 12,00,000 / 6,00,000 = ₹2.00. Including conversion would give (12,00,000 − 70,000) / 7,00,000 = ₹1.61 loss, which is a smaller loss, so the effect is anti-dilutive. Potential equity shares are treated as dilutive only if they reduce profit per share or increase loss per share, so they are ignored and diluted equals basic.

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