AS 20 EPS Calculation

Originally posted by : Srinath
	Please Help me with a few Problems Thnx in advnce!   1. Equity Shares on 1.1.2001 : 5 lac     Avg. fair value/share during 2001: 20     ESOP options given on 1.1.2001 : 1 lac shares @ 15/share   Net Profit 12 lac (No tax)      Find Diluted EPS ?   Answer Given : 1200000/525000 ?? Is this correct?   2. Calculate Basic EPS   Profit 50 lakh ( No tax)   10% Preference Shares  100 lakh   Shares at beginning 10 lakh   Bonus issued at "middle" of year : 5 lakh   Given Answer : 2.6666 how?? Correct?

Q1

EP of option = 15

MP of share = 20

No of shares acquirable with the options = 100,000                                                   (1)

First find the bonus element in the option.

EP of 100,000 options = 15*100,000 = 15,00,000

No of shares available at this price from market = 15,00,000/20 = 75,000                        (2)

Therefore bonus element in the options = (1) - (2) = 100,000 - 75,000 = 25,000 shares

Existing no of equity shares = 500,000

Add: dilutive potential equity = 25,000

Total = 525,000 shares

Dilutive effect of options on the earnings  = Nil

Therefore, Diluted EPS is correct @ 12,00,000/5,25,000

Q2

Whether bonus issued at the end or beginning or middle of the year, the period shall be reckoned from beginning of the year itself, because bonus is only capilisation of the existing ascertained profits of previous year(s)..

Hence Total no of shares = 15,00,000

PAT =                                    50,00,000

(-) Preference Dvd              10,00,000

Earngs to eqty shrhldrs     40,00,000

No of equity shares            15,00,000

EPS (Basic)                               2.67

If previous years Profits/EPS given you have to restate that years EPS taking 15,00,000 shares as the base for that year also. Same to be done for shares split or consolidation of shares also. (AS 20 rqmt)