05 November 2012
Basic earnings per share should be calculated by dividing the net profit or loss for the period attributable to equity shareholders by the weighted average number of equity shares outstanding during the period.
For the purpose of calculating basic earnings per share, the net profit or loss for the period attributable to equity shareholders should be the net profit or loss for the period after deducting preference dividends and any attributable tax thereto for the period.
Diluted Earnings Per Share For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period should be adjusted for the effects of all dilutive potential equity shares.
Net profit for the current year Rs. 1,00,00,000 No. of equity shares outstanding 50,00,000 Basic earnings per share Rs. 2.00
No. of 12% convertible debentures of 1,00,000 Rs. 100 each Each debenture is convertible into 10 equity shares Interest expense for the current year Rs. 12,00,000 Tax relating to interest expense (30%) Rs. 3,60,000 Adjusted net profit for the current year Rs. (1,00,00,000 + 12,00,000 - 3,60,000) = Rs. 1,08,40,000 No. of equity shares resulting from 10,00,000 conversion of debentures No. of equity shares used to compute 50,00,000 + 10,00,000 = diluted earnings per share 60,00,000 Diluted earnings per share 1,08,40,000/60,00,000 = Re. 1.81
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