IAS 33 – Earnings Per Share (EPS) ( summary with examples )

Objective

IAS 33 prescribes principles for determining and presenting earnings per share (EPS), to improve comparability between different entities in the same period and the same entity across periods.

EPS shows how much profit is attributable to each ordinary share of a company.

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🧾 1. Scope

Applies to:

• Entities whose ordinary shares are publicly traded, or

• Entities that are in the process of issuing such shares publicly.

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💡 2. Key Definitions

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📊 3. Basic EPS Formula

Basic EPS= Profit (Loss) attributable to ordinary shareholders / Weighted average number of ordinary shares outstanding​

Example 1 – Basic EPS

EPS Calculation:

Basic EPS=( 600,000−100,000​ ) / 500,000 =1.00 per share

✅ Basic EPS = $1.00 per share

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💹 4. Weighted Average Number of Shares

Shares may change during the year due to:

• New shares issued

• Shares bought back

• Bonus issues or stock splits

Each share is weighted by the fraction of the year it was outstanding.

Example 2 – Weighted Average

• Jan–Jun: 400,000 shares

• Jul–Dec: 600,000 shares (new shares issued in July)

Weighted average==(400,000×6/12)+(600,000×6/12)=200,000+300,000=500,000

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🧮 5. Diluted EPS

Diluted EPS considers the impact of potential ordinary shares that could reduce EPS if converted (i.e., make EPS “diluted”).

Diluted EPS=Profit attributable to ordinary shareholders (adjusted) / Weighted average number of ordinary shares (adjusted for conversion)​

Example 3 – Convertible Debt

• Net profit = $600,000

• Interest expense on convertible debt = $50,000 (after tax = $35,000)

• Ordinary shares = 500,000

• If converted → +100,000 new shares

Diluted EPS:

$$\text{Numerator}=600,000+35,000=635,000$$

Denominator=500,000+100,000=600,000

Diluted EPS=635,000 /600,000​=1.06

✅ Diluted EPS = $1.06 per share

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📉 6. Adjustments for Bonus or Share Splits

When there’s a bonus issue or stock split, restate EPS for all periods presented as if the event occurred at the beginning of the earliest period.

Example 4 – Bonus Issue

• Bonus issue: 1 new share for every 2 held (50% increase)

• Previously: 500,000 shares

• After issue: 750,000 shares

EPS for prior period must be restated using 750,000 shares as if they always existed.

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📋 7. Presentation

Entities must present:

• Basic and Diluted EPS on the face of the statement of profit or loss for:

  • Profit or loss from continuing operations

  • Profit or loss attributable to ordinary equity holders

If both consolidated and separate financial statements are presented, EPS must be disclosed in both.

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📘 8. Disclosure Requirements

Entities must disclose:

• Amounts used as numerator (profit)

• Weighted average number of shares (denominator)

• Instruments that could dilute EPS (e.g., convertible bonds, share options)

• Reconciliations between basic and diluted figures

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🧩 9. Summary Table

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🎯 10. Key Points

• EPS helps investors assess performance per share.

• Dilution shows worst-case profit per share if all convertible items become shares.

• Restate EPS for all comparative periods if capital structure changes (bonus issue, stock split).