The CA Hub

Presentation & disclosure · IAS 33

IAS 33 Earnings per Share

Summary, key points, exam traps and a worked example — written for ICAP, ACCA, ICAI, CIMA and ICAEW students.

On this page
  1. Objective
  2. Scope
  3. Key definitions
  4. Recognition & measurement
  5. Key disclosures
  6. Common exam traps
  7. Worked example
  8. Related standards
  9. Practise MCQs

Objective

Sets out how to calculate and present basic and diluted earnings per share so performance can be compared between entities and periods.

Scope

  • Entities whose ordinary shares or potential ordinary shares are publicly traded, or that are in the process of listing, and any entity that chooses to disclose EPS.

Key definitions

Basic EPS
Profit or loss attributable to ordinary equity holders of the parent divided by the weighted average number of ordinary shares outstanding.
Potential ordinary share
An instrument that may entitle its holder to ordinary shares, e.g. convertible debt, options and warrants.
Dilution
A reduction in EPS (or increase in loss per share) assuming potential ordinary shares are converted.

Recognition & measurement

Basic EPS

  • Earnings: profit after tax attributable to the parent, less preference dividends on equity-classified preference shares.
  • Shares issued at full market price are weighted for the time they are outstanding.
  • Bonus issues (and share splits) are treated as if they occurred at the start of the earliest period presented; comparative EPS is restated.
  • Rights issues below market price contain a bonus element: apply a bonus fraction (fair value before the issue ÷ theoretical ex-rights price) to shares before the issue, and restate comparatives.

Diluted EPS

  • Adjust earnings for the after-tax effect of items that would change on conversion (e.g. add back interest on convertible debt, net of tax).
  • Add the weighted average number of shares that would be issued on conversion.
  • Options and warrants: only the 'free' element is added — shares under option less the number that could be bought at average market price with the exercise proceeds.
  • Ignore potential shares that are anti-dilutive (would increase EPS).

Key disclosures

  • Basic and diluted EPS for profit from continuing operations and for total profit, on the face of the statement of profit or loss, with equal prominence (even if negative).
  • Earnings and share numbers used, with reconciliations.
  • Instruments excluded because they are anti-dilutive.
  • Significant share transactions after the reporting period.

Common exam traps

  • Do not time-weight a bonus issue — treat it as outstanding for the whole period.
  • Interest add-back for convertibles is after tax.
  • Preference dividends on redeemable (liability) preference shares are already in finance costs; do not deduct them again.
  • Remember to restate the prior-year EPS for bonus issues and the bonus element of rights issues.

Worked example: Weighted average shares

Scenario. Profit attributable to ordinary shareholders is $1,000,000. On 1 January there were 1,000,000 shares in issue. On 1 July the entity issued 300,000 shares at full market price. The year ends 31 December.

  1. Weighted shares = 1,000,000 + (300,000 × 6/12) = 1,150,000.
  2. Basic EPS = 1,000,000 ÷ 1,150,000.

Answer: Basic EPS ≈ $0.87 (87 cents).

Practise MCQs on this standard

Test your understanding of IAS 33 with free chapter-wise MCQs and explanations in these question banks.

CAF-6 Corporate ReportingICAP CAFACCA FR Financial ReportingACCACA Inter P1 Advanced AccountingICAI CA Intermediate

ICAI CA Intermediate examines Indian Accounting Standards, which are based on but can differ from IFRS. Check your syllabus.

Read the official IAS 33 text on ifrs.org