Diluted EPS

There are  2 sorts of Earning Per Share as per AS 20 issued by ICAI:-

Basic EPS= Profit Available for Equity -Shareholders

                               No. of equity shares 

Diluted EPS = Profit availble for Equity Shareholders

                                 No.of Diluted shares

Now diluted no. of shares are Basic no. of equity shares + diluted securities which are converted into equity shares like convertible debentures, bonus shares etc.

friends allow me explain diluted EPS in greater detail.

Diluted EPS:

When profit available for equity sh holders and Weighted avg no of eq sh are adjusted for the effects of all diluted potental equity shares ... the resultant EPS is called diluted EPS.

Potential Equity shares:

it is that financial instrument that can be converted into equity shares in future.

example: convertible debentures, convertable pref sh, ESOP, share warrants.

Test of dilution:

A potential eq sh is considered diluted "if and only if " its conversion into eq sh reduces the EPS from Continuing Ordinary Operations (COO).

 Hence,

Diluted EPS           =           Profit available for eq sh ( after adjusting dilution)

                                         Weighted avg no of sh  ( including diluted potential eq sh)

CA Salman Saeed

Kolkata

09339703400