Library / Technical Accounting Manual: IFRS, IAS and Ind AS Equivalents

IAS 33 - Earnings Per Share (EPS)

Indian equivalent: Ind AS 33 - Earnings Per Share

Objective and scope

IAS 33 standardises how listed companies calculate and present Earnings Per Share - the profit attributable to each ordinary share - so investors can compare profitability per share consistently across companies and over time.

Core principle

'The company made ₹100 crore profit' means little without knowing how many shares share it. EPS answers how much profit belongs to each single share. IAS 33 defines two figures: Basic EPS (on actual shares) and Diluted EPS (assuming all convertibles/options turn into shares, showing the worst-case dilution).

Defined terms and technical terminology

Term	Technical meaning
Basic EPS	Profit attributable to ordinary shareholders ÷ weighted-average number of ordinary shares outstanding during the period.
Diluted EPS	EPS recalculated assuming all potential ordinary shares (options, convertibles) are converted - showing the maximum dilution.
Weighted-average shares	Shares adjusted for the portion of the period they were outstanding.
Potential ordinary shares	Instruments that could become ordinary shares - convertible bonds, share options, warrants.
Dilutive	A potential share is dilutive if converting it reduces EPS (or increases loss per share).

Application and worked illustrations

Basic EPS

Basic EPS = profit attributable to ordinary shareholders (net profit after tax minus preference dividends) ÷ weighted-average number of ordinary shares. Shares are weighted by time outstanding - new shares issued mid-year count only for the part of the year they existed.

Worked example 1 - basic EPS with a mid-year issue

A company earns ₹40,00,000 profit (no preference shares). It had 1,00,000 shares for the first 6 months, then issued 20,000 more for the last 6 months. Weighted-average shares = (1,00,000 × 6/12) + (1,20,000 × 6/12) = 50,000 + 60,000 = 1,10,000. Basic EPS = ₹40,00,000 ÷ 1,10,000 = ₹36.36 per share.

Worked example 2 - diluted EPS

Suppose the same company also has convertible bonds that, if converted, would add 10,000 shares and save ₹1,00,000 of after-tax interest. Diluted EPS assumes conversion: adjusted profit = ₹41,00,000; adjusted shares = 1,20,000. Diluted EPS = ₹41,00,000 ÷ 1,20,000 = ₹34.17 - lower than basic EPS, warning investors that conversion would dilute their per-share earnings. Only dilutive instruments (those that reduce EPS) are included; anti-dilutive ones are ignored.

Bonus issues and share splits

A bonus issue or split gives more shares without new resources, so it is treated as if it had always existed - prior-period EPS is restated to keep comparisons fair.

Common mistake: forgetting to deduct preference dividends from profit before computing basic EPS attributable to ordinary shareholders.

IND AS LINK

Ind AS 33 aligns with IAS 33 and applies to companies whose shares/potential shares are publicly traded. Both Basic and Diluted EPS must be presented on the face of the profit and loss statement.

Further worked illustrations

Extra numeric example - bonus issue restatement

A company had 1,00,000 shares and profit of ₹20,00,000 → EPS ₹20. Mid-year it makes a 1-for-1 bonus issue (100% bonus), doubling shares to 2,00,000 without raising new money. Because a bonus issue adds no resources, it's treated as if it always existed: EPS this year = ₹20,00,000 ÷ 2,00,000 = ₹10, and last year's EPS is restated from ₹20 to ₹10 too, so the trend stays comparable.

INDIAN REGULATORY CONTEXT

Under Ind AS 33, Indian listed companies must present Basic and Diluted EPS on the face of the statement of profit and loss, for both continuing and total operations. It's one of the most scrutinised lines by Indian analysts and is quoted in every results announcement.

TECHNICAL EDGE CASE

A company has share options, but exercising them would increase EPS (because the exercise proceeds would earn more than the earnings-per-share dilution) - these are anti-dilutive and must be excluded from diluted EPS. Including every potential share is wrong; IAS 33 only includes those that reduce EPS. In a loss-making year, options are usually anti-dilutive too, so diluted EPS can equal basic EPS.