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Objective of IAS 33=
The
objective of IAS 33 is to prescribe principles for the determination and
presentation of earnings per share (EPS) amounts in order to improve
performance comparisons between different enterprises in the same period
and between different accounting periods for the same enterprise. =
Scope
IAS 33
applies to entities whose securities are publicly traded or that are in=
the
process of issuing securities to the public. [IAS 33.2] Other entities =
that
choose to present EPS information must also comply with IAS 33. [IAS 33=
.3]
If both
parent and consolidated statements are presented in a single report, EP=
S is
required only for the consolidated statements. [IAS 33.4]
Key Definitions {IAS 33.5]
Ord=
inary
share:
Also known as a common share or common stock. An equity instrument that=
is
subordinate to all other classes of equity shares.
Pot=
ential
ordinary share: A financial instrument or other contract that could resu=
lt
it its holder getting ordinary shares.
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Common Exampl=
es of
Potential Ordinary Shares
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- convertible debt;
- convertible preferred
shares;
- share warrants;
- share options; =
- share rights; <=
/o:p>
- employee stock purch=
ase
plans;
- contractual rights to
purchase shares; and
- contingent issuance
contracts or agreements (such as those arising in business
combination).
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Dil=
ution: A reduction in
earnings per share or an increase in loss per share resulting from the
assumption that convertible instruments are converted, that options or
warrants are exercised, or that ordinary shares are issued upon the
satisfaction of specified conditions.
Ant=
idilution: An increase in
earnings per share or a reduction in loss per share resulting from the
assumption that convertible instruments are converted, that options or
warrants are exercised, or that ordinary shares are issued upon the
satisfaction of specified conditions.
Requirement to Present EPS
An ent=
ity
whose securities are publicly traded (or that is in process of public
issuance) must present, on the face of the income statement, basic and =
diluted
earnings per share for: [IAS 33.66]
- profit or loss from
continuing operations attributable to the ordinary equity holders =
of
the parent entity; and
- profit or loss attribu=
table
to the ordinary equity holders of the parent entity for the period=
for
each class of ordinary shares that has a different right to share =
in
profit for the period.
Basic =
and
diluted earnings per share must be presented with equal prominence for =
all
periods presented. [IAS 33.66]
Basic =
and
diluted EPS must be presented even if the amounts are negative (that is=
, a
loss per share). [IAS 33.69]
If an =
entity
reports a discontinued operation, basic and diluted amounts per share m=
ust
be disclosed for the discontinued operation either on the face of the
income statement or in the notes to the financial statements. [IAS 33.6=
8]
Basic EPS
Basic =
EPS is
calculated by dividing profit or loss attributable to ordinary equity
holders of the parent entity (the numerator) by the weighted average nu=
mber
of ordinary shares outstanding (the denominator) during the period. [IAS
33.10]
The ea=
rnings
numerators (profit or loss from continuing operations and net profit or
loss) used for the calculation should be after deducting all expenses
including taxes, minority interests, and preference dividends. [IAS 33.=
11]
The
denominator is calculated by adjusting the shares in issue at the begin=
ning
of the period by the number of shares bought back or issued during the
period, multiplied by a time-weighting factor. IAS 33 includes guidance=
on
appropriate recognition dates for shares issued in various circumstance=
s.
[IAS 33.20-21]
Contin=
gently
issuable shares are included in the basic EPS denominator if the
contingency has been met. [IAS 33.52]
Diluted EPS
Dilute=
d EPS
is calculated by adjusting the earnings and number of shares for the
effects of dilutive options and other dilutive potential ordinary share=
s.
[IAS 33.31] The effects of anti-dilutive potential ordinary shares are
ignored in calculating diluted EPS. [IAS 33.41]
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Guidance on
Calculating Dilution
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Convertible securities. The numerator should be adjusted for t=
he
after-tax effects of dividends and interest charged in relation to
dilutive potential ordinary shares and for any other changes in income
that would result from the conversion of the potential ordinary share=
s.
[IAS 33.33]
O=
ptions
and warrants. In calculating diluted EPS, assume the exercise of
outstanding dilutive options and warrants. The assumed proceeds from
exercise should be regarded as having been used to repurchase ordinary
shares at the average market price during the period. The difference
between the number of ordinary shares assumed issued on exercise and =
the
number of ordinary shares assumed repurchased shall be treated as an
issue of ordinary shares for no consideration. [IAS 33.45]
C=
ontingently
issuable shares. Contingently issuable ordinary shares are treated as
outstanding and included in the calculation of both basic and diluted=
EPS
if the conditions have been met. If the conditions have not been met,=
the
number of contingently issuable shares included in the diluted EPS
calculation is based on the number of shares that would be issuable if
the end of the period were the end of the contingency period. Restate=
ment
is not permitted if the conditions are not met when the contingency
period expires. [IAS 33.52]
C=
ontracts
that may be settled in ordinary shares or cash. Presume that=
the
contract will be settled in ordinary shares, and include the resulting
potential ordinary shares in diluted EPS if the effect is dilutive. [=
IAS
33.58]
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Retrospective Adjustments
The
calculation of basic and diluted EPS for all periods presented is adjus=
ted
retrospectively when the number of ordinary or potential ordinary shares
outstanding increases as a result of a capitalisation, bonus issue, or =
share
split, or decreases as a result of a reverse share split. If such chang=
es
occur after the balance sheet date but before the financial statements =
are
authorised for issue, the per share calculations for those and any prior
period financial statements presented are based on the new number of
shares. Disclosure is required. [IAS 33.64]
Basic =
and
diluted EPS are also adjusted for the effects of errors and adjustments
resulting from changes in accounting policies, accounted for
retrospectively. [IAS 33.64]
Dilute=
d EPS
for prior periods should not be adjusted for changes in the assumptions
used or for the conversion of potential ordinary shares into ordinary
shares outstanding. [IAS 33.65]
Disclosure
If EPS=
is
presented, the following disclosures are required: [IAS 33.70]
- The amounts used as the
numerators in calculating basic and diluted EPS, and a reconciliat=
ion
of those amounts to profit or loss attributable to the parent enti=
ty
for the period.
- The weighted average n=
umber
of ordinary shares used as the denominator in calculating basic and
diluted EPS, and a reconciliation of these denominators to each ot=
her.
- Instruments (including
contingently issuable shares) that could potentially dilute basic
earnings per share in the future, but were not included in the
calculation of diluted EPS because they are antidilutive for the
period(s) presented.
- A description of those
ordinary share transactions or potential ordinary share transactio=
ns
that occur after the balance sheet date and that would have change=
d significantly
the number of ordinary shares or potential ordinary shares outstan=
ding
at the end of the period if those transactions had occurred before=
the
end of the reporting period. Examples include issues and redemptio=
ns
of ordinary shares, warrants and options, conversions, and exercis=
es.
An ent=
ity is
permitted to disclose amounts per share other than profit or loss from
continuing operations, discontinued operations, and net profit or loss
earnings per share. Guidance for calculating and presenting such amount=
s is
included in IAS 33.73.
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