IFRS Standard: IAS 33 Earnings per share

The objective of IAS 33 is to prescribe principles for the determination and presentation of earnings per share, so as to improve performance comparisons between different entities in the same reporting period and between different reporting periods for the same entity.

IAS 33 Objective Scope Definitions

Objective

1 The objective of this Standard is to prescribe principles for the determination and presentation of earnings per share, so as to improve performance comparisons between different entities in the same reporting period and between different reporting periods for the same entity. Even though earnings per share data have limitations because of the different accounting policies that may be used for determining ‘earnings’, a consistently determined denominator enhances financial reporting. The focus of this Standard is on the denominator of the earnings per share calculation.

Scope

2 This Standard shall apply to

  1. the separate or individual financial statements of an entity:
    1. whose ordinary shares or potential ordinary shares are traded in a public market (a domestic or foreign
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IAS 33 Measurement

Basic earnings per share

9 An entity shall calculate basic earnings per share amounts for profit or loss attributable to ordinary equity holders of the parent entity and, if presented, profit or loss from continuing operations attributable to those equity holders.

10 Basic earnings per share shall be calculated by dividing profit or loss attributable to ordinary equity holders of the parent entity (the numerator) by the weighted average number of ordinary shares outstanding (the denominator) during the period.

11 The objective of basic earnings per share information is to provide a measure of the interests of each ordinary share of a parent entity in the performance of the entity over the reporting period.

Earnings

12 For the purpose of … Read more

IAS 33 Retrospective adjustments

64 If the number of ordinary or potential ordinary shares outstanding increases as a result of a capitalisation, bonus issue or share split, or decreases as a result of a reverse share split, the calculation of basic and diluted earnings per share for all periods presented shall be adjusted retrospectively. If these changes occur after the reporting period but before the financial statements are authorised for issue, the per share calculations for those and any prior period financial statements presented shall be based on the new number of shares. The fact that per share calculations reflect such changes in the number of shares shall be disclosed. In addition, basic and diluted earnings per share of all periods presented shall … Read more

IAS 33 Presentation

66 An entity shall present in the statement of comprehensive income basic and diluted earnings per share for profit or loss from continuing operations attributable to the ordinary equity holders of the parent entity and for profit or loss attributable to the ordinary equity holders of the parent entity for the period for each class of ordinary shares that has a different right to share in profit for the period. An entity shall present basic and diluted earnings per share with equal prominence for all periods presented.

67 Earnings per share is presented for every period for which a statement of comprehensive income is presented. If diluted earnings per share is reported for at least one period, it shall be … Read more

IAS 33 Disclosure

70 An entity shall disclose the following:

  1. the amounts used as the numerators in calculating basic and diluted earnings per share, and a reconciliation of those amounts to profit or loss attributable to the parent entity for the period. The reconciliation shall include the individual effect of each class of instruments that affects earnings per share.
  2. the weighted average number of ordinary shares used as the denominator in calculating basic and diluted earnings per share, and a reconciliation of these denominators to each other. The reconciliation shall include the individual effect of each class of instruments that affects earnings per share.
  3. instruments (including contingently issuable shares) that could potentially dilute basic earnings per share in the future, but
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IAS 33 Application guidance EPS

Appendix A Application guidance

This appendix is an integral part of the Standard.

Profit or loss attributable to the parent entity

A1 For the purpose of calculating earnings per share based on the consolidated financial statements, profit or loss attributable to the parent entity refers to profit or loss of the consolidated entity after adjusting for non-controlling interests.

Rights issues

A2 The issue of ordinary shares at the time of exercise or conversion of potential ordinary shares does not usually give rise to a bonus element. This is because the potential ordinary shares are usually issued for fair value, resulting in a proportionate change in the resources available to the entity. In a rights issue, however, the … Read more

IAS 33 Increasing rate preference shares

Illustrative examples

These examples accompany, but are not part of, IAS 33.

Example 1 Increasing rate preference shares

Reference: IAS 33, paragraphs 12 and 15

Entity D issued non-convertible, non-redeemable class A cumulative preference shares of CU100 par value on 1 January 20X1. The class A preference shares are entitled to a cumulative annual dividend of CU7 per share starting in 20X4.

At the time of issue, the market rate dividend yield on the class A preference shares was 7 per cent a year. Thus, Entity D could have expected to receive proceeds of approximately CU100 per class A preference share if the dividend rate of CU7 per share had been in effect at the date of issue.

In consideration … Read more

IAS 33 Weighting shares in a period

Example 2 Weighted average number of ordinary shares

Reference: IAS 33, paragraphs 19-21

Shares issued

Treasury(a) shares

Shares outstanding

1 January 20X1

Balance at beginning of year

2,000

300

1,700

31 May 20X1

Issue of new shares for cash

800

0

2,500

1 December 20X1

Purchase of treasury shares for cash

0

250

2,250

31 December 20X1

Balance at year-end

2,800

550

2,250

Calculation of weighted average:

(1,700 x 5/12) + (2,500 x 6/12) + (2,250 x 1/12) = 2,146 shares or

(1,700 x 12/12) + (800 x 7/12) – (250 x 1/12) = 2,146 shares

(a) Treasury shares are equity instruments required and held by the issuing entity itself or by its subsidiariesRead more

IAS 33 Bonus issue

Example 3 Bonus issue

Reference: IAS 33, paragraphs 26, 27(a) and 28

Profit attributable to ordinary equity holders of the parent entity 20X0

CU180

Profit attributable to ordinary equity holders of the parent entity 20X1

CU600

Ordinary shares outstanding until 30 September 20X1

200

Bonus issue 1 October 20X1

2 ordinary shares for each ordinary share outstanding at 30 September 20X1 200 x 2 = 400

Basic earnings per share 20X1 CU600= CU1.00
(200 + 400)
Basic earnings per share 20X0CU180= CU0.30
(200 + 400)

Because the bonus issue was without consideration, it is treated as if it had occurred before the beginning of 20X0, the earliest period presented.… Read more

IAS 33 Right issue

Example 4 Rights issue

Reference: IAS 33, paragraphs 26, 27(b) and A2

20X0

20X1

20X2

Profit attributable to ordinary equity holders of the parent entity

CU1,100

CU1,500

CU1,800

Shares outstanding before rights issue

500 shares

Rights issue

One new share for each five outstanding

shares (100 new shares total)Exercise price: CU5.00

Date of rights issue: 1 January 20X1

Last date to exercise rights: 1 March 20X1

Market price of one ordinary share immediately before exercise on 1 March 20X1:

CU11.00

Reporting date

31 December

Calculation of theoretical ex-rights value per share

Fair value of all outstanding shares before exercise of rights + total amount received from exercise of rights
Number of shares outstanding before exercise + number of shares issued … Read more