Ind AS 33

Earnings per Share

EIRC, Kolkata
Mohit Jain
16 February 2018

For discussion purposes only

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Scope
• Ind AS 33 is applicable to companies that have issued ordinary shares to which Ind ASs
notified under the Companies Act apply.

• When an entity presents both consolidated financial statements and separate financial
statements, the disclosures required by Ind AS 33 shall be presented both in the
consolidated financial statements and separate financial statements.

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Key Concepts

Ordinary share
• Equity instrument subordinate to all other classes of equity instruments. In Indian
context, the term ‘ordinary shares’ is equivalent to ‘equity shares’

Potential ordinary share

• Financial instrument or contract that may entitle its holder to ordinary shares
‒ Examples: convertibles, options and warrants
• Dilutive when conversion to ordinary shares would reduce EPS or increase loss per
share

Dilution
• Reduction in EPS or an increase in loss per share
• Assumes conversion of convertible instruments, exercise of options or warrants or that
ordinary shares are issued upon the satisfaction of specified conditions

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Ordinary Shares

• An ordinary share is an equity instrument that is subordinate to all other classes of

equity instruments.
• Ordinary shares participate in profit for the period only after other types of shares such
as preference shares have participated.
• An entity may have more than one class of ordinary shares.
• Ordinary shares of the same class have the same rights to receive dividends.

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Potential Ordinary Shares

• A potential ordinary share is a financial instrument or other contract that may entitle its
holder to ordinary shares.
• Examples of potential ordinary shares are:
 Financial liabilities or equity instruments, including preference shares, that are
convertible into ordinary shares
 Options and warrants
 Shares that would be issued upon the satisfaction of conditions resulting from
contractual arrangements, such as the purchase of a business or other assets.

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Key Concepts

Item Basic EPS

Earnings • Profit or loss attributable to ordinary equity holders of the

(the numerator) parent entity

Shares • Weighted average number of ordinary shares outstanding

(the denominator) during the period

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Basic EPS Calculation
• Basic earnings per share shall be calculated by dividing profit or loss attributable to
ordinary equity holders of the parent entity (the numerator) by the weighted average
number of ordinary shares outstanding (the denominator) during the period.

• Profit or loss used is the after-tax profit or loss.

• Profit or loss for the year is adjusted for after-tax amounts of preference dividends,
differences arising on settlement of preference shares and other similar effects relating
to preference shares classified as equity.

• Further, where any item of income or expense which is otherwise required to be

recognised in profit or loss in accordance with Ind ASs is debited or credited to
securities premium account / other reserves, the amount in respect thereof shall be
deducted from profit or loss from continuing operations for the purpose of calculating
basic earnings per share.

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Basic EPS Calculation (contd.)
• It is important to be clear about the classification of the preference shares (equity vs.
debt) and the tax treatment of the preference share dividends.
• The after-tax amount of preference dividends that is deducted from profit or loss is:
 The after-tax amount of any preference dividends on non-cumulative preference
shares declared in respect of the period; and
 The after-tax amount of the preference dividends for cumulative preference shares
required for the period, whether or not the dividends have been declared. The
amount of preference dividends for the period does not include the amount of any
preference dividends for cumulative preference shares paid or declared during the
current period in respect of previous periods.

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Basic EPS Calculation (contd.)
• When calculating the weighted average number of ordinary shares during a period,
use a daily time weighting factor or a reasonable approximation.
• The weighted average number of ordinary shares outstanding during the period and for
all periods presented shall be adjusted for events, other than the conversion of
potential ordinary shares, that have changed the number of ordinary shares
outstanding without a corresponding increase in resources (e.g., bonus issue, share-
split).
• In a capitalisation or bonus issue or a share split, ordinary shares are issued to existing
shareholders for no additional consideration. Therefore, the number of ordinary shares
outstanding is increased without an increase in resources. The number of ordinary
shares outstanding before the event is adjusted for the proportionate change in the
number of ordinary shares outstanding as if the event had occurred at the beginning of
the earliest period presented.
• For example, on a two-for-one bonus issue, the number of ordinary shares outstanding
before the issue is multiplied by three to obtain the new total number of ordinary
shares, or by two to obtain the number of additional ordinary shares.

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Key Concepts

Contingently issuable share:

1. Ordinary shares issuable for little or no cash or other consideration
2. Dependent on the satisfaction of specified conditions
‒ If conditions satisfied:
• Include in diluted EPS from start of period, or if later from the date of contingent
share agreement
• Include in basic EPS from the date when all the necessary conditions are satisfied
‒ If conditions not satisfied:
• Include in diluted EPS based on the number of shares that would be issuable if the
end of the period were the end of the contingency period.
3. Shares that are issuable solely after the passage of time are not contingently issuable
shares, because the passage of time is a certainty.

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Key Concepts
Item Basic EPS Diluted EPS
Earnings • Profit or loss attributable to • Adjust for the effects of
(the numerator) ordinary equity holders of potential ordinary shares
the parent entity • May include dividends,
interest or other changes
in income or expense

Shares • Weighted average number • Assume conversion of all

(the denominator) of ordinary shares dilutive potential ordinary
shares
• Assume conversion as of
the beginning of the
period, or issue date, if
later

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Clarifications - Ind AS Transition Facilitation Group (ITFG)
Background: Paragraph 9 of Ind AS 33, Earnings per Share states that, “An entity shall
calculate basic earnings per share amounts for profit or loss attributable to ordinary equity
holders of the parent entity….”

Query: Does this mean that a subsidiary company, not wholly owned, should present
EPS only for the portion of the profit which is attributable to the parent entity?

Clarification: When an entity presents EPS in its separate financial statements, then the
same shall be calculated based on the profit or loss attributable to its equity shareholders.

[ITFG Clarification Bulletin 11, Issue 3]

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Clarifications - Ind AS Transition Facilitation Group (ITFG)
Background: Paragraph 12 of Ind AS 33 states that, “Where any item of income or
expense which is otherwise required to be recognised in profit or loss in accordance with
Indian Accounting Standards is debited or credited to securities premium account/other
reserves, the amount in respect thereof shall be deducted from profit or loss from
continuing operations for the purpose of calculating basic earnings per share.”

Query: Whether the amount debited to Foreign Currency Monetary Item Translation
Difference Account (FCMITDA) is required to be reduced from profit or loss from
continuing operations for calculating Basic EPS?

Clarification: Exchange differences that are being debited to FCMITDA is in accordance

with Ind AS and therefore, the same is not required to be reduced from profit or loss from
continuing operations for the purpose of calculating basic earnings per share.

[ITFG Clarification Bulletin 10, Issue 5]

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EPS Workings - Extracts from Annual Report
Statement of Profit and Loss for the year ended 31 March, 2017

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EPS Workings - Extracts from Annual Report
Disclosure in Notes to Accounts - IndAS

Disclosure in Notes to Accounts – PY before bonus issue

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EPS Workings - Extracts from Annual Report
Statement of Profit and Loss for the year ended 31 March, 2017

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EPS Workings - Extracts from Annual Report
Disclosure in Notes to Accounts - IndAS

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Overview of key differences
Area of Indian GAAP IFRS Ind AS
Difference

Primary AS 20 – Earnings Per Share IAS 33 – Earnings Per Share Ind AS 33 – Earnings
literature Per Share

Disclosure in AS 20 requires disclosure of basic and diluted EPS When an entity presents both EPS is required to be
separate information both in the separate and consolidated separate and consolidated financial presented in both,
financial financial statements of the parent. statements, EPS is required to be consolidated as well as
statements presented only in the consolidated separate financial
financial statements. An entity may statements.
disclose EPS in its separate
financial statements voluntarily.
Disclosure of No separate disclosure for EPS from continuing The statement of comprehensive Similar to IFRS.
EPS from and discontinuing operations. income will present basic and diluted
continuing and earnings per share from continuing
discontinued operations and if applicable, basic
operations and diluted earnings per share from
discontinued operations. EPS from
discontinued operations may
alternatively be disclosed in the
notes.
Extraordinary EPS with and without extraordinary items is to be Since IAS 1 prohibits the disclosure Similar to IFRS.
items presented. of items as extraordinary, no
separate consideration is given to
such items while calculating EPS.

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Overview of key differences
Area of Indian GAAP IFRS Ind AS
Difference

Primary AS 20 – Earnings Per Share IAS 33 – Earnings Per Share Ind AS 33 – Earnings
literature Per Share

Items of No specific guidance. No specific guidance Where any item of income

income or or expense which is
expense debited The ICAI has proposed a limited revision to AS 20 otherwise required to be
or credited to which will require that for purpose of calculating recognised in profit or loss
securities basic earnings per share, the net profit or loss for in accordance with Indian
premium the period attributable to equity shareholders Accounting Standards is
account/ other should be the net profit or loss for the period after debited or credited to
reserves adjusting the amount in respect of an item of securities premium
income or expense which is debited or credited to account/ other reserves,
share premium account/reserves, that is otherwise profit or loss from
required to be recognised in the statement of profit continuing operations
and loss in accordance with Accounting Standards. should be adjusted by the
amount in respect thereof
for the purpose of
calculating basic earnings
per share.

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Questions

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