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Educational Material on Ind AS 33 Earnings per Share
Ind AS 33 Earnings per Share : Ind AS 33 Earnings Per Share sets out how to calculate both basic earnings per share (EPS) and diluted EPS. The calculation of Basic EPS is based on the weighted average number of ordinary shares outstanding during the period, whereas diluted EPS also includes dilute potential ordinary shares (such as options and convertible instruments) if they meet certain criteria. Ind AS 33 was reissued in December 2003 and applies to annual periods beginning on or after 1 January 2005.
History of Ind AS 33
| January 1996 | Exposure Draft E33 Earnings Per Share |
| February 1997 | Ind AS 33 Earnings Per Share |
| 1 January 1999 | Effective date of Ind AS 33 (1997) |
| 18 December 2003 | Revised version of Ind AS 33 issued by the IASB |
| 1 January 2005 | Effective date of Ind AS 33 (Revised 2003) |
| 7 August 2008 | IASB proposes to amend Ind AS 33. Click for Press Release (PDF 48k). |
| 1 January 2009 | Effective date of consequential amendments arising from Ind AS 1 (2007) |
Educational Material on Ind AS 33 Earnings per Share
Ind AS 33 Earnings per Share : Earning per share, also called net income per share, is a market prospect ratio that measures the amount of net income earned per share of stock outstanding. In other words, this is the amount of money each share of stock would receive if all of the profits were distributed to the outstanding shares at the end of the year.
Earnings per share is also a calculation that shows how profitable a company is on a shareholder basis. So a larger company’s profits per share can be compared to smaller company’s profits per share. Obviously, this calculation is heavily influenced on how many shares are outstanding. Thus, a larger company will have to split its earning amongst many more shares of stock compared to a smaller company.
Formula of Ind AS 33
Earnings per share or basic earnings per share is calculated by subtracting preferred dividends from net income and dividing by the weighted average common shares outstanding. The earnings per share formula looks like this.
Analysis of Ind AS 33
Earning per share is the same as any profitability or market prospect ratio. Higher earnings per share is always better than a lower ratio because this means the company is more profitable and the company has more profits to distribute to its shareholders.
Although many investors don’t pay much attention to the EPS, a higher earnings per share ratio often makes the stock price of a company rise. Since so many things can manipulate this ratio, investors tend to look at it but don’t let it influence their decisions drastically.
Example of Ind AS 33
Quality Co. has net income during the year of $50,000. Since it is a small company, there are no preferred shares outstanding. Quality Co. had 5,000 weighted average shares outstanding during the year. Quality’s EPS is calculated like this.
As you can see, Quality’s EPS for the year is $10. This means that if Quality distributed every dollar of income to its shareholders, each share would receive 10 dollars.
Objective of Ind AS 33
The objective of Ind AS 33 is to prescribe principles for determining and presenting earnings per share (EPS) amounts to improve performance comparisons between different entities in the same reporting period and between different reporting periods for the same entity. [Ind AS 33.1]
Scope of Ind AS 33
Ind AS 33 applies to entities whose securities are publicly traded or that are in the process of issuing securities to the public. [Ind AS 33.2] Other entities that choose to present EPS information must also comply with Ind AS 33. [Ind AS 33.3] If both parent and consolidated statements are presented in a single report, EPS is required only for the consolidated statements. [Ind AS 33.4]
Disclosure of Ind AS 33
If EPS is presented, the following disclosures are required: [Ind AS 33.70]
- the amounts used as the numerators in calculating basic and diluted EPS, and a reconciliation of those amounts to profit or loss attributable to the parent entity for the period
- the weighted average number of ordinary shares used as the denominator in calculating basic and diluted EPS, and a reconciliation of these denominators to each other
- instruments (including contingently unmissable shares) that could potentially dilute basic EPS in the future, but were not included in the calculation of diluted EPS because they are antidilutive for the period(s) presented
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