Earning per share
This query is : Resolved
05 November 2012
I want to know what is the difference between Basic and diluted eps?
05 November 2012
Please read As-20 https://www.icai.org/post.html?post_id=8660
in above link....
in above link....
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.
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.
05 November 2012
Example:-
Example - Convertible Debentures
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
Example - Convertible Debentures
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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