Earning per Share

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kumar (Querist)

12 October 2007 for the calculation of EPS what are the cosideration to be taken.

IMP Que : is there any provition to take cosidetaion of no of preference shares

( total no of shares equity + preference ) ???

Srinath A. N.

Srinath A. N. (Expert)

12 October 2007 For calculating EPS preference shares will not be considered. Preference Shares will carry assured rate of dividend and it will be having preferencial right over the equity shares when the question of payment of dividend arises. The preference shareholders shall be paid agreed rate of dividend when company having the profits. However, equity shareholders neednot be paid dividend even though the company have profit.

More importantly, when the preference share carries assured persentage of dividend, question of EPS will not arise.

kumar

kumar (Querist)

12 October 2007 ok i agree the same is there any clear clarifications with sections or any other references

Srinath A. N.

Srinath A. N. (Expert)

12 October 2007 Calculating EPS is not referred in any Section. However, Schedule VI of the Companies Act requires disclosure of EPS. Accounting Standeed 20 states EPS is to be calculated on after providing for preference dividend. Even International Accounting Standard 33 also state the same (You may refer both).

kumar

kumar (Querist)

12 October 2007 ok thanks for your help,

i have one more question in this regard,

if the company shre application money includes both prefernce & Equity.

whats the treatment for the purpose of EPS

Ravikumar.G

Ravikumar.G (Expert)

12 October 2007 Normally Share Application Money should be equity only. For the purpose of EPS only fully paid Equity Share should be considered. Share application Money is a pending allotment which is to be transferred to Paid up capital. For EPS Preference sharges are not to be considered.

Srinath A. N.

Srinath A. N. (Expert)

12 October 2007 I agree with your opinion, since Equity Share Application money is potential equity share. However, In case you receive application money under book building route pending fixing of final price per share on the basis of bidding, how will you consider for calculating EPS?

kumar

kumar (Querist)

12 October 2007 can u consider shareapplication money as potential equity shares ??

Srinath A. N.

Srinath A. N. (Expert)

17 October 2007 No, I will not consider share application money as potential equity since allotment is a contingent event (this opinion is purly personal)

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