SIRC OF ICAI

CA-FINAL
PAPER-1
IND AS 33 HANDOUT

FINANCIAL REPORTING

CA M. F. JAISON. B. Com, FCA

Mail ID: jaistin@rediffmail.com
Contact No: 9444055698

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CA M. F. JAISON. B. Com, FCA
 IND AS 33
Earnings per Share
Lecture Support Theory Notes

 EPS refers to profit/loss attributable to an ordinary share [Equity share]

for a period.
 EPS is a tool for measuring the performance of a company by making
either.
- Inter-Firm comparison [or]
- Intra-Firm comparison.

OBJECTIVE & SCOPE:

 This standard prescribes the principles for determination & presentation of

EPS.
 This standard is applicable to all the companies having ordinary shares &
to which IND AS is applicable.
 It is applicable for both CFS and SFS.
 For this purpose EPS in CFS shall be based on information presented in
CFS and EPS in SFS shall be based on information presented in SFS.
 This standard requires presentation of basic & diluted EPS from:
i. Continuing operations
ii. Overall operations [i.e., continued & discontinued operations]
 On the face of statement of P&L.
 Basic & diluted EPS relating to discontinued operations can be presented
either in notes or on the face of statement of P/L.

PAOS= PAT-PD-DDT on PD

 NOTES:

Gain/Loss in relation to settlement of preference share capital should also

be adjusted for determining p/l attributable to ordinary shares.

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CA M. F. JAISON. B. Com, FCA
 ISSUES [Relating to numerator]:

1. PREFERENCE DIVIDEND

Cumulative pref. Non-cumulative pref.

dividend dividend

Deducted only if it is
Deducted irrespective declared
of declaration

2. Preference share capital issued at discount/premium:

Such discount shall be amortised using effective interest rate and included
in the determination of P/L attributable to ordinary shares.

3. Settlement gain/loss:
Gain/loss arising from redemption of preference share capital shall br
adjusted against the profit attributable to ordinary shares.

4. Income/expense that are to be adjusted in P/L as per IND AS but

adjusted against security premium/reserves as provided in statue, then
such income or expense are adjusted against the profits attributable to
ordinary shares.

 EFFECTIVE DATE:

TRANSACTION EFFECTIVE DATE

Shares issued for:
i. Cash Date on which cash is receivable.
ii. Services rendered Date on which services rendered.
iii. Acquisition of asset Date on which the acquisition was
recognised.
iv. Settlement of liability with Date on which interest ceases to
interest accrue.
v. Shares issued for options Date of conversion.
converted into
debentures/PSC
vi. Shares issued in relation to Date of acquisition.
Biz.Acqisition.[Business

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CA M. F. JAISON. B. Com, FCA
 comb. As per IND AS 103]

vii. Mandatory conversion of debt Date on which such contract was

or PSC entered.
viii. Contingent issueable ordinary Date on which the conditions are
shares satisfied.
ix. In case of contingently It shall be excluded in computation of
returnable shares basic EPS untill the contingent
conditions expires.

RETROSPECTIVE RESTATEMENT:
If the number of shares changes [Inc/Dec] in the current period without
change in the resources other than the conversion of potential ordinary
shares, then EPS shall be restated retrospectively.

(i.e.,)EPS of all comparative period shall be restated. Increase or

Decrease shall be considered as effective from the beginning of the
earliset comparative period.

EXAMPLE:

1. Bonus issue
2. Bonus element in rights issue
3. Shares split
4. Shares consolidation

BONUS ELEMENT IN RIGHT ISSUE:

Bonus element =

FV of the share prior to rights

Theoretical EX-right price

Weighted Average No. of ordinary Shares =

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CA M. F. JAISON. B. Com, FCA
DILUTED EPS:

 Dilution arising from conversion of potentially ordinary shares into

ordinary shares.

Potential ordinary shares refers to any financial instruments or other

contracts that entities the holders to a ordinary shares of entity in future.

Examples:

I. Convertible instruments [PSC/Debentures]

II. Option & warrant
III. Contracts top issue the ordinary shares on the satisfaction of
specified condition.

Dilution refers to decrease in EPS or increase in less per share arising

from the assumption that the convertible instruments are converted,
options and warrants are exercised and conditions specified in the
contract are satisfied.
This standard requires an entity to considered the effects of all dilutive
potential ordinary shares in the determination of diluted EPS. (i.e., Anti-
dilutive potential ordinary shares shall not be considered)

Dilutive potential ordinary shares refers to those potential ordinary shares

that will decrease the profit per share or increase the loss from continuing
operations of the entity.

 ADJUSTED PROFIT:

Profit/loss attributable to ordinary to ordinary shares considered.

For Basic EPS + Savings in interest [net of tax] + Savings in dividend

any other income or expense arising from conversion of dilutive potential
ordinary share.

Adjusted weighted average no. of shares:

Wt. Avg. No. of ordinary shares for basic EPS = XXX

Add: Wt. Avg. No. of dilutive potential ordinary shares = XXX
XXX

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CA M. F. JAISON. B. Com, FCA
 In the computation of weighted average number of diluted potential
ordinary shares, the following should be considered:

1. If the diluted potential ordinary shares issued in the past and convertible
in future, it is assumed as converted at the beginning of the current
period.
2. If the diluted potential ordinary shares issued in the current year and
converted in future it is assumed as converted on the date of issue.
3. If the diluted potential ordinary shares converted during the current year,
then it is considered as converted from the beginning of current year to
actual date of conversion for diluted EPS purpose.

 OPTIONS AND WARRANTS:

 It refers to financial instrument that entities the holder to subscribe

certain number of ordinary shares at a pre-determined price on a future
date on the satisfaction of certain condition.
 All the options outstanding will not be considered as potential ordinary
shares. Only those shares that will be issued for nil consideration (i.e.,
Bonus in option) alone will be considered as potential ordinary shares.

 It is determined as =

 Options are always dilutive, if the entity has profit from continuing
operations.
 Options are always anti-dilutive, if the entity has loss from continuing
operations.

Effect of potential ordinary shares of subsidiary, joint venture and

associate resulting into:

Ordinary shares of subsidiary, joint Ordinary shares of parent entity

venture & associates
Subsidiary, Parent Subsidiary, Parent
Joint Venture & Joint Venture &
associate associate no
change
SFS CFS SFS CFS
A. No effect A. No A. No
Considered for for BEPS effects in change in
DEPS No effect BEPS BEPS
B. Consider
for DEPS B. B.
Change Change
in DEPS in DEPS

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CA M. F. JAISON. B. Com, FCA
 Questions for Solving

Question No.1

Following is the data for company XYZ in respect of number of equity

shares during the financial year 2019-2020. Find out the number of
shares for the purpose of calculation of basic EPS as per Ind AS 33.

S.No Date Particulars No of Shares

1 1-Apr-2019 Opening balance of outstanding 1,00,000
equity shares
2 15-Jun-2019 Issue of equity shares 75,000
3 8-Nov-2019 Conversion of convertible pref 50,000
shares in Equity
4 22-Feb-2020 Buy back of shares (20,000)
5 31-Mar-2020 Closing balance of outstanding 205,000
equity shares

Question No.2
NP for the year ending 31/3/2019 = `18 lacs
= `60 lacs
NP for the year ending 31/3/2020
= 20 lacs
No of equity share outstanding on 31/3/2019
= 1 for every 1 held
Bonus issue on 1/9/2019

Find out EPS – basics for both the years

Question No.3
NP for the year ending 31/03/2019 – `11 lakhs. NP for the year ending
31/3/2020 – `15 lakhs. No. of shares prior to rights issue – 5 lakhs.
Rights issue rate = 1 for every 5. Fair value prior to rights = `21.
Subscription price for rights issue = `15. Right issue was made on
1/5/2019. Find out EPS basic for the year 2018-19 and 2019–20.

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CA M. F. JAISON. B. Com, FCA
Question No.4
Find out diluted earnings per share from the following:
Net Profit for Current Year = `1 Crore,
No. of Equity shares Outstanding throughout the year = 50 lacs
12% convertible debentures of ` 100 Lacs of `100 each
Each debenture is convertible to 10 equity shares. Income tax rate =
30%.
Find out
a) Basic earnings Per Share
b) Diluted earnings per Share
Find out the impact of dilutive earning per share on basic EPS.

Question No.5

The issued & fully paid Share capital of a company as on 31/03/2019

comprised as follows:
4,00,000 7% Pref. Shares `1 each 4,00,000
40,00,000
40,00,000 Equity share @ Re.1
44,00,000

Profit for the financial year = ` 3,72,000

On 01/01/2020 the company had issued ` 12 lacs 6% convertible
debentures.
The conversion will result in 14,40,000 equity shares.

Find out
a) Basic earnings Per Share
b) Diluted earnings per Share
Tax 35% Effective Dividend Tax: 20.3576%

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CA M. F. JAISON. B. Com, FCA
Question No.6
The issued & fully paid Share capital of a Co., 01/04/2019 comprised as
follows:

4,00,000 7% preference share @ Re.1 = 4,00,000

= 40,00,000
40,00,000 Equity Share Re.1 share
44,00,000

Profit for Financial Year = ` 4,07,040

The company had ` 12 lacs 6% debenture convertible debenture can be
converted for 4 lacs equity shares. All debentures were issued equity
shares by 31st Dec. 2019. These shares were ranked dividend
proportionate for the period of the conversion.

Find out a) Basic earnings Per Share b) Diluted earnings per Share
Tax 35% Effective Dividend Tax: 20.3576%
Question No.7
The issued fully paid Share Capital of a Company as on 1/4/2020
comprised of -
6,00,000 7% preference share @ `1 6,00,000

200000 equity share @ Re.1 each 200,000

8,00,000

Profit for Financial Year is `3,46,000

The No. of options available being 200000
Market Price per share = `3
Exercisable price = `2.40
Find out Basic EPS & Dilutive EPS.

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CA M. F. JAISON. B. Com, FCA
 Question No.8

ABC Company wants to calculate diluted EPS for the year 2019-2020.
The weighted average number of ordinary shares are 5,00,000 as on
31.3.2020. Company has provided following details about the potential
ordinary shares.

1. On 1st April 2015 company has issued convertible preference

shares for a period of 10 years. The face value of the share is
`10 each and total value of preference share capital is
`75,00,000
2. On 1st January 2017 company has issued convertible debentures
having a face value of ` 10 each for a period of 3 years. The
total value of debenture issue is `90,00,000. After completion
of third year the debentures will be converted into equity
shares.
3. Company issued convertible preference shares 15 th November
2019, for a period of 5 years, having a face value of `10 and
issue value of `60,00,000

Calculate the weighted average number of potential shares.

Question No.9

Parent

`12000 (excluding any earnings of, or

Profit attributable to ordinary
shareholders of the parent entity dividends paid by the subsidiary)

10,000
Ordinary shares outstanding

800 ordinary share

Instruments of subsidiary owned by the
parent
30 warrants exercisable to purchase
ordinary shares of subsidiary

300 convertible preference shares

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CA M. F. JAISON. B. Com, FCA
 Subsidiary:
Profit `5,400
Ordinary shares outstanding 1,000
Warrants 150, exercisable to
purchase shares of the
subsidiary
Exercise price `10
Average market price of 1 ordinary
share `20
Convertible preference shares 400, each convertible into
one ordinary share
Dividends on preference shares `1 per share

No inter-company eliminations or adjustments were necessary

except for dividends. Income taxes ignored.

1. Calculate Basic EPS and Diluted EPS of Subsidiary.

2. Calculate Basic EPS and Diluted EPS of Parent entity for the purpose
of presentation in Consolidated Financial Statement.

Question No.10
`1 crore
Earning to Equity share
20 Lacs
No. of Equity share at the beginning of the year
`75
Avg. fair value / Share

Potential Equity Shares

Options 1,00,000 with exercise price of ` 60
8,00,000 shares entitled to a cumulative
Convertible Preference Shares
dividend of ` 8 per share. Each preference
share is convertible into 2 equity shares.

Attributable tax, e.g., corporate 20.3576%

dividend tax

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CA M. F. JAISON. B. Com, FCA
 Nominal amount ` 10,00,00,000. Each
12% Convertible Debentures of
` 100 each debenture is convertible into 4 equity shares.

30%
Tax rate

Find out
a) Earnings Per Share – basic
b) Diluted Earnings Per Share

Question No.11
An Entity has outstanding 2400 written put options on its ordinary shares
with an exercise price of `60. The average market price of its ordinary
shares for the period is `40. Compute the above written put options in the
calculation of Diluted EPS
Question No.12
Sonic Ltd. has issued contingently issuable shares on 1st January 2019.
The Condition to be satisfied is the average turnover of the company for
the last three quarters must exceed `100 million. If the condition is
satisfied the company will issue the shares within a period of 6 months.
The conditions will be effective from the quarter ending 31 st March 2019.
Company achieves the said target on ending 31st December 2019. Explain
what will be the status of shares while calculating diluted EPS?
Question No.13
On 1st July 2017, NRI company enters into a contract with its strategic
partner S & Co, that 10,000 shares of NRI would be issued to S & Co,
when NRI will achieve the net profit before tax of `1 crore and will
continue to retain the same profit for minimum of another 1 year. What
will be the status of 10,000 shares in calculation of Basic and Diluted EPS
for various financial years, assuming that company achieves the profit of
`90 lacs, `1.2 crores and ` 1.35 crores in the year 2017-18, 2018-19 and
2019-20 respectively.

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CA M. F. JAISON. B. Com, FCA
Question No.14
Rakesh Ltd appoints CA Akhil as CFO of the company on 1st July 2018.
The company enters into an agreement with CA Akhil that the company
would issue 1,000 shares to him, if he can achieve the 20% rise in the
market value of the share by end of 1 year of his appointment. The
current market value of the share is `500 per share.
What will be the status of the shares for calculation of EPS, for the year
2018-19 and 2019-20 assuming the prices of the shares are as follows:
On 31st March 2019 `620
On 30th June 2019 `610.

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CA M. F. JAISON. B. Com, FCA