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Pas 33

PAS 33 outlines the requirements for calculating and presenting earnings per share (EPS) information. It requires entities to present both basic EPS and diluted EPS on the face of the income statement with equal prominence. Basic EPS is calculated by dividing net income by the number of ordinary shares outstanding, after deducting any preference share dividends. Diluted EPS incorporates the dilutive effects of potential ordinary shares. EPS is used to evaluate the attractiveness of an entity's ordinary shares and assess management's performance.

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103 views

Pas 33

PAS 33 outlines the requirements for calculating and presenting earnings per share (EPS) information. It requires entities to present both basic EPS and diluted EPS on the face of the income statement with equal prominence. Basic EPS is calculated by dividing net income by the number of ordinary shares outstanding, after deducting any preference share dividends. Diluted EPS incorporates the dilutive effects of potential ordinary shares. EPS is used to evaluate the attractiveness of an entity's ordinary shares and assess management's performance.

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elle frias
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PAS 33: Earnings Per Share

Earnings Per Share (PAS 33)


 is the amount attributable to every ordinary share outstanding during the
period. Thus, the earnings per share information pertains only to ordinary
shares. It is not necessary for preference share because there is a definite rate
of return for such share.

 
Two Presentations of EPS

1. Basic earnings per share


2. Diluted earnings per share

 Public entities are required to present earnings per share.


 An entity shall present basic and diluted earnings per share on the face of the
income statement with equal prominence for all periods presented.
 When an entity presents both consolidated financial statements and separate
financial statements, the disclosures required by the standard need be
presented only on the basis of the consolidated information.
 An entity that chooses to disclose EPS on its separate financial statements
shall present such EPS information only on the face of its separate income
statement. An entity shall not present such EPS information on the
consolidated financial statement.

 
Use of EPS

 It is a determinant of the market price of ordinary share, thus indicating the


attractiveness of the ordinary share as an investment.
 It is ”measure of performance” of management in conducting operation.
 It is the basis of dividend policy of the entity.

 
Examples of potential ordinary shares
1. Financial liabilities or equity instruments, including preference shares, that are
convertible into ordinary shares.
2. Share warrants
3. Share options or employee plan that allow employee to receive ordinary
shares as part of their remuneration.
4. Shares that would be issued upon satisfaction of certain conditions resulting
from contractual arrangements such as purchase of a business or assets.

 
Basic EPS
Formula
            Basic EPS=   Net Income                    
                               Ordinary shares outstanding
 

 The net income is equal to the amount after deducting dividends on


preference share.

Note:

 If the, PS is cumulative, the preference dividend for the current year only is
deductible from the net income, whether such dividend is declared or not.
 If the PS is noncumulative, the dividends for the current year is deductible
from the net income only if there is declaration.

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