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    Pas 33

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    Anne
    This document discusses the accounting standard PAS 33 on earnings per share (EPS). It defines EPS as the amount earned by each ordinary share during a period. There are two types: basic EPS and diluted EPS. Basic EPS is computed by dividing net income by the weighted average number of ordinary shares. Diluted EPS reflects potential dilutive ordinary shares that would decrease EPS and is computed using the treasury stock method. EPS must be presented on the statement of comprehensive income for continuing operations, discontinued operations, and total comprehensive income.

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    Pas 33

    Uploaded by

    Anne
    101 views7 pages
    This document discusses the accounting standard PAS 33 on earnings per share (EPS). It defines EPS as the amount earned by each ordinary share during a period. There are two types: basic EPS and diluted EPS. Basic EPS is computed by dividing net income by the weighted average number of ordinary shares. Diluted EPS reflects potential dilutive ordinary shares that would decrease EPS and is computed using the treasury stock method. EPS must be presented on the statement of comprehensive income for continuing operations, discontinued operations, and total comprehensive income.

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    PAS 33

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    This document discusses the accounting standard PAS 33 on earnings per share (EPS). It defines EPS as the amount earned by each ordinary share during a period. There are two types: basic EPS and diluted EPS. Basic EPS is computed by dividing net income by the weighted average number of ordinary shares. Diluted EPS reflects potential dilutive ordinary shares that would decrease EPS and is computed using the treasury stock method. EPS must be presented on the statement of comprehensive income for continuing operations, discontinued operations, and total comprehensive income.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    101 views7 pages

    Pas 33

    Uploaded by

    Anne
    This document discusses the accounting standard PAS 33 on earnings per share (EPS). It defines EPS as the amount earned by each ordinary share during a period. There are two types: basic EPS and diluted EPS. Basic EPS is computed by dividing net income by the weighted average number of ordinary shares. Diluted EPS reflects potential dilutive ordinary shares that would decrease EPS and is computed using the treasury stock method. EPS must be presented on the statement of comprehensive income for continuing operations, discontinued operations, and total comprehensive income.

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    of 7

    28/04/2022

    CONCEPTUAL FRAMEWORK
    &
    ACCOUNTING STANDARDS

    PAS 33 Earnings Per Share

    Learning Competencies

    • Explain how basic earnings per share is computed.


    • Explain how diluted earnings per share is
    computed.

    Conceptual Framework & Acctg.


    2
    Standards (by: Zeus Vernon B. Millan)

    Definition

    • Earnings per share (EPS) is a computation made for


    ordinary shares. It is a form of profitability ratio
    which represents how much was earned by each ordinary
    share during the period. No EPS is presented for
    preference shares because these shares have a fixed
    return represented by their dividend rates.

    Conceptual Framework & Acctg.


    3
    Standards (by: Zeus Vernon B. Millan)

    1
    28/04/2022

    Types of Earnings per share

    1. Basic earnings per share


    2. Diluted earnings per share

    Conceptual Framework & Acctg.


    4
    Standards (by: Zeus Vernon B. Millan)

    Basic Earnings Per Share

    Conceptual Framework & Acctg.


    5
    Standards (by: Zeus Vernon B. Millan)

    Considerations in computing “Profit or loss”

    a. Profit or loss should be net of income tax expense


    b. Profit or loss should be adjusted for the after-tax amounts of
    preference dividends, differences arising on the settlement of
    preference shares, and other similar effects of preference
    shares classified as equity.

    Conceptual Framework & Acctg.


    6
    Standards (by: Zeus Vernon B. Millan)

    2
    28/04/2022

    Adjustments for preference dividends

    a. If the preference shares are cumulative, one-year


    dividend is deducted from profit or loss whether
    declared or not.
    b. If the preference shares are non-cumulative, only the
    dividend declared is deducted from profit or loss.

    Conceptual Framework & Acctg.


    7
    Standards (by: Zeus Vernon B. Millan)

    Weighted average number of outstanding


    ordinary shares
    • Shares are usually time-weighted from the date consideration is
    receivable (which is generally the date of their issue). Thus:
    a. Shares issued outright are averaged from the issuance date.
    b.Subscribed shares are averaged from the subscription date.
    c. Treasury shares are averaged
    i. as reduction to the number of outstanding shares from the
    reacquisition date; or
    ii. as addition to the number of outstanding shares from the
    reissuance date

    Conceptual Framework & Acctg.


    8
    Standards (by: Zeus Vernon B. Millan)

    Restatement of EPS

    • EPS in previous periods are adjusted retrospectively when an


    entity issues any of the following:
    a. A capitalization or bonus issue (e.g., share dividend);
    b. A bonus element in any other issue, for example a bonus element
    in a rights issue to existing shareholders (also referred to as
    preemptive stock rights);
    c. A share split (increase in number of shares with corresponding
    decrease in par value); and
    d. A reverse share split (consolidation of shares or decrease in
    number of shares with corresponding increase in par value).

    Conceptual Framework & Acctg.


    9
    Standards (by: Zeus Vernon B. Millan)

    3
    28/04/2022

    Rights issue

    Conceptual Framework & Acctg.


    10
    Standards (by: Zeus Vernon B. Millan)

    Diluted earnings per share

    • Diluted earnings per share is the amount of profit for the


    period per share, reflecting the maximum dilutions that would
    have resulted from conversions, exercises, and other
    contingent issuances that individually would have decreased
    earnings per share and in the aggregate would have had a
    dilutive effect.
    • Only basic earnings per share is presented if an entity has no
    dilutive potential ordinary shares (i.e., simple capital
    structure).
    Conceptual Framework & Acctg.
    11
    Standards (by: Zeus Vernon B. Millan)

    • The computation of diluted earnings per share is based on the


    assumption that the dilutive potential ordinary shares were
    converted or exercised. It is:
    1. “As if” the convertible preference shares or convertible bonds have
    been converted; or
    2. “As if” the options or warrants have been exercised.

    • The conversion or exercise is assumed to have taken place on the


    date the potential ordinary shares became outstanding,
    regardless of the date of actual conversion or exercise.

    Conceptual Framework & Acctg.


    12
    Standards (by: Zeus Vernon B. Millan)

    4
    28/04/2022

    Conceptual Framework & Acctg.


    13
    Standards (by: Zeus Vernon B. Millan)

    Options, warrants and their equivalents

    • When computing for diluted earnings per share, the “treasury


    share method” shall be used in computing for the incremental
    shares. This method assumes that:
    1. The options or warrants are exercised and
    2. The proceeds received from the exercise are used to purchase
    treasury shares at the average market price.
    3. The difference between the treasury shares assumed to have been
    purchased and the option shares represents the incremental
    shares.

    Conceptual Framework & Acctg.


    14
    Standards (by: Zeus Vernon B. Millan)

    Treasury share method

    Conceptual Framework & Acctg.


    15
    Standards (by: Zeus Vernon B. Millan)

    5
    28/04/2022

    Financial statement Presentation

    • Basic and Diluted earnings per share are computed on the


    following:
    1. Profit or loss from continuing operations
    2. Profit or loss from discontinued operations, if the entity reports
    a discontinued operation.
    3. Profit or loss for the year

    • EPS is not computed on other comprehensive income and total


    comprehensive income.

    Conceptual Framework & Acctg.


    16
    Standards (by: Zeus Vernon B. Millan)

    Financial statement Presentation (Continuation)

    • EPS computed on profit or loss from continuing


    operations and profit or loss for the year are presented
    on the face of the statement of profit or loss and other
    comprehensive income. If the entity uses a two-
    statement presentation, EPS is presented only on the
    separate income statement.

    Conceptual Framework & Acctg.


    17
    Standards (by: Zeus Vernon B. Millan)

    APPLICATION OF
    CONCEPTS
    PROBLEM 2: FOR CLASSROOM DISCUSSION

    Conceptual Framework & Acctg. Standards (by: Zeus Vernon B. Millan) 18

    6
    28/04/2022

     QUESTIONS????
     REACTIONS!!!!!

    Conceptual Framework & Acctg.


    19
    Standards (by: Zeus Vernon B. Millan)

    END
    Conceptual Framework & Acctg. Standards (by: Zeus Vernon B. Millan) 20

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