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

Phnom Penh HR

1 month ago

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.

🧾 1. Scope

Applies to:

Entities whose ordinary shares are publicly traded, or
Entities that are in the process of issuing such shares publicly.

💡 2. Key Definitions

Term	Meaning
Earnings per Share (EPS)	Profit or loss attributable to ordinary shareholders, divided by the weighted average number of ordinary shares outstanding.
Basic EPS	Profit per ordinary share based on actual shares outstanding during the period.
Diluted EPS	Profit per share adjusted for the effect of potential ordinary shares (convertibles, options, warrants).
Potential Ordinary Shares	Financial instruments that could be converted into ordinary shares (e.g., convertible debt, share options, preference shares).

📊 3. Basic EPS Formula

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

Example 1 – Basic EPS

Particulars	Amount
Net profit for the year	$600,000
Preference dividend	$100,000
Weighted average shares	500,000 shares

EPS Calculation:

$Basic EPS =(600 , 000 - 100 , 000 = 1.00 per share$

✅ Basic EPS = $1.00 per share

💹 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)

🧮 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:

$Numerator = 600, 000 + 35, 000 = 635, 000$

$Diluted EPS = 635 , 000 / 600 , 000 = 1.06$

✅ Diluted EPS = $1.06 per share

📉 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.

📋 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.

📘 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

🧩 9. Summary Table

Type	Formula	Includes	Example
Basic EPS	Profit after preference dividends ÷ Weighted average ordinary shares	Actual shares	$1.00
Diluted EPS	Adjusted profit ÷ Adjusted shares (incl. potential shares)	Convertible instruments	$1.06

🎯 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).