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EPS

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ACCOUNTING

STANDARD

20

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HOWTO

CALCULATEEARNINGS

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RESTATED

ENT BEPS

RE DILUTED

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PRESENT BASIC EPS

HOW TO CALCULATE

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PROFIT

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LESS:

TAX EXP.

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PAT

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LESS :

DIVIDEND

PAID/DECLARED/PROVIDED ONPREFERENCE

SHARES (UNCUMULATIVE)

DIVIDEND DUE ON PREFERENCESHARES (CUMULATIVE)

-CDT/DDT ON PREF.SHARES

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EARNINGS

AVAILABLE FOR

SHAREHOLDERS

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DIVIDE BY

WE

IGH

TED

PERIOD AMT

OF SHARES

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3 VARIABLES

TO BE

MULTIPLIED

IN NUMBEROFSHARES

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DAYS (RESOURCES WITH

THE COMPANY)(BONUS/SPLIT,MERGER,BON

US PART IN RIGHT FULLYEAR AS NO RESOURCES)

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SHARES NUMBER DAYS AMT (RECD) DIVIDEND

EXCL.PREMIUM RIGHT(MULT/INCR)

Opening ESC 365

Public IssueCalls Received

Bonus/split 365

PaidPortion Right

Free Portion Right 365

Less_ Buyback

Less- Forfeited

Amalgamation(merger) 365

Amalgamation(Purchase)

Partly Paid( if Voting Right)

Converted Shares

Allotted

Continegently issued Shares

(if all conditions fulfilled)

Weighted Equity Shares BXCXDXE

365

DILUTED

CONVERTIBLE

SHARE APPLICATION(BUS. USE)

Continegently Not fulfilled

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HOW TO CALCULATE

BONUS(FREE)PORTION

OF RIGHT

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RIGHTS ISSUE

(Accounting year 01-01-20X1 to 31-12-2011)

Net profit Year 20 x 0 : Rs. 11,00,000

Year 20 x 1 : Rs. 15,00,000

No. of shares outstanding prior to rights issue: 5,00,000

Rights issue One new share for each five outstanding (i.e. 1,00,000 new shares)

Rights issue price: Rs. 15.00

Last date to exercise rights : 1st March 20 X 1

Fair value of one equity share immediately prior to exercise of rights on 1st March 20 X 1 : Rs.

21.00

Computation of theoretical ex-rights fair value per share

Fair value of all outstanding shares immediately prior to exercise of rights + total amount received

from exercise

Number of shares outstanding prior to exercise + number of shares issued in the exercise.

= (Rs. 21.00 x 5,00,000 shares) + (Rs. 15.00 x 1,00,000 shares)

5,00,000 shares + 1,00,000 shares

Theoretical ex-rights fair value per share = Rs. 20.00

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RIGHTS ISSUE (CONTD.)

Computation of adjustment factor

= Fair value per share prior to exercise of rights = Rs. 21.00 = 1.05

Theoretical ex-rights value per share Rs. 20.00

Computation of earnings per share

Year 20 X 0 Year 20 x 1EPS for the year 20 x 0 as originally reported : Rs. 2.20

[Rs. 11,00,000 / 5,00,000 shares]

EPS for the year 20 x 0 restated for rights Rs. 2.10

[Issue : Rs. 11,00,000 / (5,00,000 shares x 1.05)]

EPS for the year 20 x 1 including effects of rights issue Rs.2.55

Rs. 15,00,000

(5,00,000 x 1.05 x 2/12) + (6,00,000 x 10/12)

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COMPUTATION OF FUTURE

CONSIDER EFFECT OF FUTURE EQUITY

(POTENTIAL SHARES i.e. Convertible Securities,Share Application etc Simply calculate EPS

as if they have already Converted in equityconsidering income effect and increase in no.of shares as follows )

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COMPUTATION OF DILUTED EARNINGS

(Accounting year 01-01-20XX to 31-12-20XX) 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 Rs. 100 each 1,00,000

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 conversion 10,00,000

of debentures

No. of equity shares used to compute 50,00,000 + 10,00,000 = 60,00,000

diluted earnings per share

Diluted earnings per share 1,08,40,000 / 60,00,000 = Re. 1.81

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Matters

Potential Equity Shares

o Anti- Dilutive When?

o Process ofDetermination of Dilutive

/ Anti-Dilutive

o If conversion increases

earnings / decreases

loss

o Consider each seriesseparately

o Sequence such

consideration in

descending order of

dilution

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