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1. The objective of this standard is to prescribe principles for the determination and presentation of earnings per share which will improve comparison of performance among different enterprises for the same period and among different accounting periods for the same enterprise.

2. The focus of this standard is on denominator of the earnings per share calculation. Even though earnings per share data has limitations because of different accounting policies used for determining “earnings” a consistently determined denominator enhances the quality of financial reporting.



This standard should be applied by all the entities.

Diluted EPS is not required to disclose in following entity

1) SME

2) SME sized non-corporate entity falling in Level-II or Level III

However non-corporate SME falling in Level-III may not disclose the information required by para 48(ii) of the standard.

2. In consolidated financial statement, the information required by this standard should be presented on the basis of consolidated information.(As per AS-21)

3. In case of holding subsidiary company relationship, this standard requires the presentations of EPS on the basis of consolidated financial statements as well as individual financial statements of the parent. In CFS, such information is presented on the basis of consolidated information.

1. Tripura Pvt Ltd is an unlisted closely held Company with Turnover less than Rs. 50 Crores. While finalizing the accounts. The Director (Finance) of the Company disputed the applicability of AS-20 of the Company. Comment [Final (Aud.) – Nov. 2005]


The company should compute and disclose EPS according to AS-20. The contention of Director (Finance) is incorrect. The Auditor should ensure that EPS is disclosed as per AS-20, otherwise he should appropriately qualify the Audit Report.


4.1  An equity share is a share other than a preference share

4.2  A preference share is a share carrying preferential rights to dividends and repayment of capital.

4.3  A financial instrument is any contract that gives rise to both a financial asset of one enterprise and financial liability or equity shares of another enterprises.

4.4  A potential equity share is a financial instrument or other contract that entitles, or my entitle, its holder to equity shares.

4.5  Share warrants or options are financial instruments that give the holder the right to acquire equity shares.

4.6 Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s length transaction.

5. Equity Share

- equity shares participate in the net profit for the period only after preference shares

- an enterprise may have more than one class of equity shares.

- equity shares of the same class have the same rights to receive dividends.

6. Financial Instruments

-  it is any contract that gives rise to both a financial asset of one enterprise and a financial liability or equity shares of another enterprise.

Financial Assets

(a) Cash

(b) A contractual right to receive cash or another financial asset from another enterprise

(c) A contractual right to exchange financial instruments with another enterprise under conditions that are potentially favorable or

(d) An equity share of another enterprise

Financial Liability

It is any liability that is a contractual obligation to deliver cash or another financial asset to another enterprise or to exchange financial instruments with another enterprise under conditions that are potentially unfavorable.

7. Some of the examples potential equity shares are:

a) debt instruments or preference shares, that are convertible into equity shares

b) share warrants

c) options including employee stock option plans under which employees of an enterprise are entitled to receive equity shares as part of their remuneration and other similar plans; and

d) shares which would be issued upon the satisfaction of certain conditions resulting from contractual arrangements (contingently issuable shares), such as the acquisition of a business or other assets, or shares issuable under a loan contract upon default of payment of principal or interest, if the contract so provides.

8. and 9. Presentation

Basic EarningPer Share (even if amount is loss)

Diluted EarningPer Share (even if amount is loss)

on the face of the statement of profit and loss for each class of equity shares that has a different right to share in the net profit for the period.

An enterprise should present basic and diluted earning per share with equal prominence for all periods presented.


Basic Earnings Per Share. =

Net profit or loss for the period attributable to equity shareholders **


Weighted average number of equity shares outstanding during the period@@

** 11. Net profit or loss for the period after deducting preference dividends and any attributable tax thereto for the period.

12. calculate the net profit/loss for the period including prior period items and extraordinary items as per AS-5 and also deduct tax expense (current tax and deferred tax) unless AS-5 requires otherwise.

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CA.Sajid M Boghra 



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