: CHAPTER 5 :

EARNINGS PER SHARE

; s

Intended Learning Outcomes

After reading this chapter, you should be able to:

State the objective of basic earnings per share information;

compute basic earnings per share;
AWN

explain the objective of diluted earnings per share information;

identify potential diluters of earnings per share;
calculate diluted earnings per share; and
Aw

state the appropriate presentation for earnings per share.

Introduction

Shareholders are primarily interested in how much they earn

from their investment in an entity's share. The disclosure of earnings
per share on the face of the statement of comprehensive income
addresses this information need of the shareholders. Financial analysts
have historically considered the earnings per share information as an
indicator of an entity's profitability.
Saphee nD

SCOPE OF IAS 33 Earnings Per Share

IAS 33, Earnings Per Share, prescribes the principles for
determffiing and presenting earnings per share. IAS 33 requires entities
whose ordinary shares or potential ordinary shares are publicly traded
or are in the process of issuing ordinary shares or potential ordinary
shares to include a.section in the statement of comprehensive income
information on earnings per share. coun ne

The objective of earnings per share (EPS) information is to

improve the comparison_of. performance information among different
enterprises in the Same period and performance information of the same-
entity ‘between reporting periods. The statement requires a (dual
presentation of earnings per share on the face of the statement of
vy

Scanned with CamScanner

 Chapter 5 - Earnings Per Share

comprehensive ‘income: the basic earnings per share and. diluted

share. If an entity prepares the statement of
earnings per
present the
comprehensive income in a two-statement format, it shall
earnings per share information in the income statement as illustrated in
Chapter 3 of this book.

If an enti Sccia). consolidated and unconsolidated financial

statements, it shallshow’ the earnings per share_in..the consolidated
financial statements. However, an entity may disclose, earnings per
share information in its ECHR UMBtet financial statements.
Pret( - conO, decisie> cone
BASIC EARNINGS PER SHARE
An entity shall calculate basic earnings per share for profit or¢
loss attributable to the enterprise's ordinary shareholders (holders of
eee
common stock). An Ordinary shshare (or common stock) is an. equity
instrument that is subordinate to aly ae classes _ of aid
instruments. aw
ID AB Me at in Sirens
om ater
—
a

The objective of basic earnings per share information is to

measure each ordinary share's interests in the entity'ss performance over
the reporting period. ees

An enterprise shall calculate the basic earnings per share by

dividing the profit or loss attributable to ordinary shareholders by the
‘weighted average pubes of ordinary shares outstanding during the
period.

The Numerator

The profit or loss for the period attributable to ordinary

Shareholders should be the profit or loss for the BEMGd | after making
adjustments for the following:
AN p
: \ ; e amounts of preference (preferred stock) dividends; —
¢ ) \ J : : }

we ° redemption premium payable on preference shares; and l

° other similar effects of preference shares classified as

equity. , /

Adjustments to Profit for Amount of Preference Dividends

The amount of a dividends that is deducted from profit t

or loss is (paragraph 14, IAS 33)

Scanned with CamScanner

 Chapter 5 = Earnings Per Share

(a) the amount of any dividends on non-cumulative

preference shares declared in respect of the period only;

(b) the amount of dividends for cumulative preference shares

required for the period, whether or not the dividends
have been declared. This amount does not include
dividends -for cumulative preference shares paid or
declared during the current period in respect of previous
periods.

——~ Tf the preference shares are non-cumulative, only the

declarec on preference shares during the.period are. deducted from
profit to determine the earnings attributable to ordinary shareholders. If
preference shares are umulative, the total amount of dividends
required for the current period, whether declared or not, should be
deducted from profit’in arriving at the earnings attributable to the
ordinary shareholders. Hence, , ‘ t
AO you j
| | gine « NOR PNT unt
Profit - Preference Dividends = Basic |
Weighted average no. of ordinary shares outstanding | Earnings Per Share

Adjustments for Differences in Settlement of Preference Shares

Preference shares may be repurchased or retired under an

entity's tender to the holders. The excess amount paid over the carrying
amount of the preference shares represents a to the preference
shareholders and a charge to the retained earnings. This amount is
deducted in calculating the profit orloss attributable to ordinary
holdérs of the entity (paragraph 16, IAS 33). C

Any excess of the carryi aount of preference shares over the

fair value.of the consideration given (the amount paid) s a to
the profit to compute the amount of profit attributable to ordinary
shares. The result is then divided over the weighted average number of
ordinary shares outstanding during the period.

To explain the preceding, if there are preference shares retired

during the period and the retirement price exceeds the carrying amount
of the preference shares, then

| Profit - Preference Dividends - (retirement price — CV of preference = EPS

nary shares outstanding_
Weighted average number of ordi
ch —
RP > eh
231

Scanned with CamScanner

Chapter 5 - Earnings Per Share

f there are preference share s retired ring the period and the
irement
unt of , the pre fer enc e s hares is (more than the ret
carrying ' amo
price, then

ference _- reti reme nt price |

dlit =Eps
7 Profit -- Preference Dividends + CV of prefe tan
4
shares outs
Weighted average number of ordinary

The Denominator
ay &
In all computations of earnings per share, the weighted average
utes the basis
number of shares outstanding during the period constit
red during
for the per share amounts reported. Shares issued or reacqui
the period affect the average number of outstanding shares and must be
the fraction of the period they are outstanding. The
weighted by
rationale of this approach is to find ‘the equivalent number of whole
shares outstanding for the year. :

To illustrate, assume that Atlas, Inc. has the following changes

in its ordinary share shares outstanding for the period. .

Date Share Changes Outstanding

' . Sh,

January 1 Beginning balance 90,000

April 1 Issued 30,000 shares for cash 30,000
July 1 Purchased 39,000 shares (39,000) _
November 1 _Isstied 60,000 shares for cash ~ 60,000
December 31 Ending balance 141,000

Computation of weighted average number of shares outstanding

90,000 x 12/12 90;000

30,000: x 9/12 22,500
39,000 x 6/12 (19,500)
60,000 x 2/12 10,000
Weighted average number of shares outstanding 103,000

ADJUSTING FOR THE EFFECTS OF

BONUS ISSUE AND SHARE SPLIT

The weighted average number of ordinary shares outstanding

during the period and for all periods presented shall be adjusted for
events other than the conversion of potential ordinary shares that have
changed the number of ordinary shares outstanding without a
corresponding change in resources (paragraph 26, IAS:33).

Scanned with CamScanner

 Cc ter
5 — Earnings Per Share

Such events described in the pre ceding

paragraph refer to fonus )
jssues (more popularly known as stock ividends), bonus elements in a
rights issue to existing shareholders (s 3 or share rights), share
splits, or reverse share splits.
Q

When bonus issues or share splits occur, the computation of the

weighted average number of shares requires restatement of the shares
outstanding before the bonus issue or split. Additional shares
outstanding as a result of the bonus issue are assumed to have been
outstanding since the beginning of the earliest _period presented or at the
date of the issugnce of the shares ‘(before the split or bonus issue},
whichever comes(later\> A bonus issue or share split is restated because
these transactions do not change the_shareholders'investment but only
\increase‘the number of ordinary shares representing this investment.

To illustrate, assume the following:

Date . Share Changes - Sh. Outstanding

January 1 Beginning balance ~ _~ 100,000 /

March 1 Issued 20,000 shares for cash ~~ 20,000
June 1 60,000 additional shares (50%
: bonus issue) ai | 60,000
November 1 Issued 30,000 shares for cash 30,000
December 31 Ending balance 210,000

Computation of weighted average number of shares outstanding

100,000 x 12/12 x 1.5. . 150,000

20,000 x 10/12 x 1.5 ; 25,000
30,000 x 2/12 | 5,000
Weighted average number of shares outstanding 180,000

ADJUSTING FOR THE EFFECTS OF THE STOCK RIGHTS

When stock rights are issued, the exercise price is often less
than the fair value of the shares. Therefore, such a rights issue includes
a bonus element. An entity shall use, as the denominator in computing
the basic earnings per share, the number of ordinary shares before the
issue, multiplied by the following factor:

Fair value per share immediately before the exercise of rights

Theoretical ex-rights fair value per share

eo:
“3

YP etal
233

Scanned with CamScanner

 Chapter 5 - Earnings Per Share

calculated by
The theoretical ex-rights fair value per share is

(a) adding the aggregated fair value of the shares

immediately before the exercise of the rights and the
proceeds from the exercise of the rights, and

(b) dividing the sum determined in (a) by the number of

shares outstanding after exercising the rights.

To illustrate, assume the following information:

Profit for 2022 - P1,500,000

Shares outstanding before the rights issue 50,000 shares
_ Terms of the rights issue:
One new share for every five shares outstanding
Exercise price P50
Last date to exercise rights March 1, 2022
Fair value of one ordinary share before exercise
of the rights on March 1, 2022 P110

Computation of the theoretical ex-rights value per share:

FV of all outstanding shares + total amount received from exercise of rights

‘Number of shares outstanding before exercise + number of shares issued
in the exercise

(1 10 x 50,000 shares) + (50 x 10,000 shares) . 6,000,000 S

50,000 shares + 10,000 shares \ 60,000 =100.00

Computation of adjustment factor:

So.

Fair value per share before exercise of rights

bed
mo

So
S

Theoretical ex-rights value per share = 300.00 = 44

Computation of earnings per share: 6
t
Profit sf 1,500,000 = 25,35
Number of shares outstanding — 59,167 shares* i aa

*‘Jan.1ltoMar.1 550,000 x 1.1x 2/12 9,167

Mar. 1 to Dec. 31 60,000 x 10/12 50,000
;
Weighted average no. of shares outstanding 09,167

ORDINARY SHARES ISSUED IN A BUSINESS COMBINATION

Ordinary shares issued as part of the consideration transferred

in a business combination are included in the weighted average number
“Bie
234

Scanned with CamScanner

 Chapter 5 - Earnings Per Share

as shares from the acquisition dat because the acquirer incorporates

into its statement of comprehensive income the acquiree's profits and
Josses from that date (paragraph 22, IAS 33). |
To. illustrate, assume the following changes in the ordinary
shares outstanding for the period.

Date Share Changes Sh. Outstanding

January 1 Beginning balance 90,000

April 1 Issued 30,000 shares for cash 30,000
July 1 Purchased 39,000 shares Se (39,000)
November 1 Issued 60,000 shares in a
business combination accounted
for by the purchase method — . 60,000
December 31 Ending balance A 141,000

Computation of weighted average number of shares outstanding

90,000 x 12/12 90,000

30,000 x 9/12 22,500 .
39,000 x 6/12 (19,500)
60,000 x 2/12 10,000
Weighted average number of shares outstanding 103,000

DILUTED EARNINGS PER SHARE

An entity shall calculate diluted earnings per share amounts for

profits or loss attributable to ordinary equity holders of the entity and, if
presented, profit or loss from continuing operations .attributable to
those equity holders (paragraph 30, IAS 33).

The objective of diluted earnings per share is to provide a

measure of the interest of each ordinary share in the performance of an
entity while giving effect to all dilutive potential ordinary shares
outstanding during the period (paragraph 32, IAS 33).

A potential ordinary share is a financial instrument or another

contract that gives the holder the right to acquire ordinary shares at a
specified price for a given period. Examples of potential ordinary shares
are:

(a) financial liabilities or equity instruments, including

preference shares, that are convertible into ordinary
shares (e.g., convertible preference shares and
ae
convertible bonds);

235

Scanned with CamScanner

 Chapter 5 - Earnings Per Share

(b) options and warrants;

shares that would be issued upon satisfying conditions

(c) ag
from contractual arrangements, ‘such
resulting
assets.
purchasing a business OF other
agp in
Dilution is a Gansdien in earnings_per_share or an indze
loss per-share-resulting from the assumption that the entity converted
instruments, exercised the options and warrants, or
the convertible
‘issued ordinary shares upon fulfilling certain conditions.

DILUTIVE AND ANTI-DILUTIVE POTENTIAL ORDINARY SHARES

Potential ordinary shares should be treated as dilutive when,

and only when, their conversion to ordinary shares would decrease
earnings per share or increase loss per share from continuing
operations of the entity. On the other hand, they are anti-dilutive when
their conversion to ordinary shares would increase earnings per share
or decrease loss per share from continuing operations. The effects of
anti-dilutive potential ordinary shares are ignored in calculating diluted
earnings per share.

The computation of the diluted earnings per share is similar to

the calculation of the basic EPS, except that the earnings attributable to
ordinary shareholders and the weighted average number of outstanding
shares should be adjusted for the effects of all dilutive potential
ordinary shares. ; Nabe

An enterprise should adjust the profit attributable to ordinary

shareholders for any other income or expense resulting from converting
the dilutive potential ordinary shares. Suppose the enterprise had
dilutive preference shares outstanding during the period. It shall add
the after-tax dividends for the dilutive preference shares to the profit
attributable to the ordinary shareholders. Consequently, if it has
dilutive convertible bonds outstanding, it shall add to the profit
attributable to the ordinary shareholders the after-tax interest on such
bonds. Thus the calculation of the EPS assumes that the convertible
preference shares or bonds had been converted into ordinary shares,
such that there would be no dividends on the preference nor interest on
the bonds.

The weighted average number of ordinary shares outstanding is

increased by the weighted average number of additional ordinary shares
that would have been outstanding, assuming the conversion of all
_ dilutive potential ordinary shares, Dilutive potential ordinary shares are
, assumed to have been converted into ordinary shares at the beginning

aa-

Scanned with CamScanner

 Chapter 5 - Earnings Per Share

. ae or, if later, the date of the issue of the potential

3 ordinary
s :

The following indicates whether the instrument is dilutive. A

company may apply this test if it has a particular (not simultaneous)
class of potential ordinary shares for a given reporting period.

Convertible Post-tax interest avoidable < BEPS

bonds number of ordinary shares to convert bonds

Convertible Preference dividend avoidable < BEPS

preference number of ordinary shares to convert
shares : preference shares

Share Exercise price < Average

options and market
warrants price

Assume the following independent cases:

Case A: Potential ordinary share in the form of convertible bonds

Profit for 2022 attributable to ordinary shareholders:,P10,000,000

Weighted average number of ordinary shares outstanding during 2022:
2,000,000 shares
The average fair value of one ordinary share during 2022: P75.00

Potential ordinary shares:

5% Convertible bonds - Face value of P100,000,000. Each P1,000
bond is convertible to 20 ordinary shares. There is no
amortization of premium or discount affecting interest expense.
Tax rate - 25%

Computation of basic earnings per share

P10,000,000 + 2,000,000 = P5.00

i ieee ‘oa
i. y
Computation of diluted earnings per share

P10M + (100M x 5% x 75%) P13,750,000 | iy

4,000,000 = P3.4375 a y
2,000,000 + (100,000 x 20)
“The convertible. bond is dilutive because it decreases the v
/
earnings per share. Alternatively, dividing P3,750,000 by 2,000,000

237

Scanned with CamScanner

Chapter 5 — Earnings Per Share )

shares may test the dilutive effect. The result is P1.875, which is lower
than the basic earnings per share. After validating its dilutive effect,
proceed to compute the diluted earnings per share, as illustrated above.

Case B: Potential ordinary share in the form of convertible

preference shares

Profit for 2022: P20,000,000

Weighted average number of ordinary shares outstanding aunts 2022:
2,000,000 shares
Average fair value of one ordinary share during 2022: P75.00
Potential ordinary shares:
Convertible preference shares: 800,000 sii entitled to an annual
dividend of P8.00 per share. Each preference share is convertible
to 2 ordinary shares.

Computation of basic earnings per share

P20,000,000 — (800,000 x 8)
2,000,000 © = P6.80

To test for dilution, divide P6,400,000 by 1,600,000 shares. The

result is P4, which is less than P6.80. The convertible preference share
is, therefore, dilutive. Then,. proceed to the following computation of
diluted earnings per share.

Computation of diluted earnings per share

P20,000,000 P20,000,000 - ¥
2,000,000 + (800,000 x 2) 3,600,000 = P3556

Case C: Potential ordinary share in the form of warrants

Profit for 2022: P10,000,000 -

Weighted average number of ordinary s shares s buitsbhnididg during 2022:
2,000,000 shares
Average fair value of one ‘ahlidady share during 2022: P75.00
Potential ordinary shares:
Warrants: 100,000 with an exercise price of P60.00
No preference shares were outstanding

238

Scanned with CamScanner

 Ch5ap
~- Earning
te s Perr
Share
Computation of basic earnings per share

P10,000,000 + 2,000,000 = P5.00

Because the exercise price of the warrants is less than the
average fair value of the ordinary share during 2022, the warrants are
dilutive.

The weighted average number of shares is adjusted for the

assumed exercise of dilutive warrants and subsequent assumed
purchase of ordinary shares at the market price. Thus, an entity shall
make two assumptions: first, all the warrants are exercised, and
second, the entity used the proceeds to acquire ordinary shares at the
average market price. The excess of the shares assumed issued over the
shares assumed acquired is the number of shares assumed issued
without consideration. : a

Number of ordinary shares to be issued upon

exercise of warrants 100,000
Less: number of ordinary shares issued at an average price
(100,000 x 60) / 75 80,000
Number of shares assumed issued without consideration 20,000

Only the 20,000 shares assumed to have been issued without

consideration are added to arrive at the denominator for the
computation of the DEPS.

The above circumstance may also be interpreted using the

treasury shares method, as follows:

Number of ordinary shares to be issued upon exercise of warrants 100,000

Less: number of ordinary shares assumed to have been
repurchased at the average price (treasury shares)
(100,000 x 60) / 75 80,000
Assumed increase in the number of shares outstanding 20,000

Computation of diluted earnings per share

P10,000,000 P10,000,000 _ P4.95

2,000,000 + [100,000 x (75-60) + 75] 2020000 7S

If the potential ordinary shares were exercised during the period,

the adjustment is necessary only during the period they had not been
exercised. The BEPS computation considered the warrants exercised,
which increased the number of outstanding ordinary shares.

for a particular
To illustrate, assume the following information
entity that issues only ordinary shares:

239

Scanned with CamScanner

Chapter
5 —- Earnings Per Share

Profit for 2022: P10,000,000

g during 2022:
Weighted average number of ordinary shares outstandin
2,000,000 shares
P75.00
Average fair value of one ordinary share during 2022:

Potential ordinary shares:

5% Convertible bonds: Face value of P10,000,000. Each P1,000
bond is convertible to 20 ordinary shares. There is no
amortization of premium or discount affecting interest expense.
Tax rate - 25%

Assume that the convertible bonds were issued on January 1,

2022, and that % of the bonds were converted on July 1, 2022.

The computations are as follows:

Computation of basic earnings per share

P10,000,000 + 2,000,000 = P5.00

Computation of diluted earnings per share

The numerator is computed as follows:

Profit P 10,000,000
Interest avoidable:
On assumed conversion
From January 1 to July 1
- 10M x5%x 6/12 x 75% 187,500
From July 1 to December 31
10M x 4x 5% x 6/12
x 75% Listy
JAC BTA.
Numerator P 10,234,375_

: Notice that the interest relating to converted bonds is ignored aS

this interest was not incurred and did not decrease the reported profit.

The denominator is computed as follows:

Weighted average number of shares outstanding

during 2022 2,000,000
Increase in number of shares due to assu
med
conversion of bonds
50,000 x 12/12 | 50,000
150,000x 6/12 ___75,000_
Weighted average number of ordinary shares
outstanding (for DEPS) 2,125,000
‘ ——————

240

Scanned with CamScanner

 Chapter 5 - Earnings Per Share

The 50,000 shares are the assumed number of shares issued in

exchange for the bonds remaining not converted as of December 31,
2022. The 150,000 shares are the shares issued on July 1 in exchange
for the bonds converted. To compute the diluted earnings per share,
they are assumed to be converted as early as January 1. The shares
issued on July 1 are already included in determining the weighted
average number of shares outstanding during 2022. Thus, the
adjustment necessary is for January 1 to June 30, during which no
bonds had been converted yet.

Diluted earnings per share, therefore, is:

P10,218,750 + 2,125,000 = P481

Different Classes of Potential Orainary Shares Outstanding during a

Reporting Period

Some entities may have different outstanding classes of potential

ordinary shares during a reporting period. In considering whether
potential ordinary shares are dilutive or anti-dilutive, each issue of a
series of potential ordinary shares is considered separately rather than
in aggregate. The sequence in which potential ordinary shares are
considered may affect whether they are dilutive.

Therefore, to maximize the dilution of basic earnings per share,

each issue or series of potential ordinary shares is considered from the
most dilutive to the least dilutive. A series of computations are needed
to arrive at the fully diluted earnings per share. Each issue is taken one ©
after the other to compute the diluted earnings per share.

The illustration is based on an TpstraAuve Example of IAS 33

Earnings Per Share.
P16,400,000
_ Profit for the period
Weighted average number of ordinary shares
| 2,000,000
outstanding
Average market price of one ordinary share
during the year ‘P75.00

Potential ordinary shares:

Options 100,000 with an exercise price of P60.

Convertible 800,000 with a par value of P100 entitled /

preference shares to a cumulative dividend of P8 per share.
Each preference share is convertible to
two ordinary shares.

QA

Scanned with CamScanner

 Chapter 5 —- Earnings Per Share

5% convertible Face amount ‘of P100,000,000. Each

bonds P1,000 bond is convertible to 20 ordinary
shares.

Tax rate 25%

The basic earnings per share is computed as follows:

P16,400,000 — P6,400,000 = P5.00
2,000,000

The "earnings per incremental share" of each series of potential

_ ordinary shares are computed as follows:

Increase in
earnings Earnings
attributable to Increase in the per
Potential ordinary _ number of incremental
ordinary shares shareholders | ordinary shares share
Options Nil 100,000 (75-60) Nil
i 75
| = 20,000

Convertible 800,000 x P8 800,000 x 2

preference = P6,400,000 = 1,600,000 P4.00
shares

5% convertible | P100M x 5% x 75% 100,000 x 20

bonds = P3,750,000 = 2,000,000 *P1.875

The sequence to include the potential ordinary shares is as

follows:

(1) options
(2) convertible bonds
(3) convertible preference shares

When only the options are considered, the dilutive earnings per
share is computed as:

P10,000,000/2,020,000 = P4.95
The amount is lower than the basic earnings per share. Thus,
the options are dilutive.

When convertible bonds are considered, the diluted earni

ngs per
share computation is modified as follows:

242

Scanned with CamScanner

 Chapter 5 — Earnings Per Share

P10,000,000 + P3,750,000
2,020,000 + 2,000,000 rae
The convertible bonds are also dilutive because their inclusion in
the denominator further decreases the earnings per share.

When convertible preference shares are included in the

computation, the result is as follows:

P13,750,000 + P6,400,000 P3.59

4,020,000 + 1,600,000

The computed earnings per share is higher than the previous

figure (before considering the convertible preference shares). This
indicates that the convertible preference shares are anti-dilutive and
are, therefore, ignored in the computation of diluted earnings per share.
_ Thus, the diluted earnings per share in this illustration is P3.42.

PRESENTATION AND DISCLOSURES

An entity shall present on the face of the statement of

comprehensive income basic and diluted earnings per share for profit or
loss from continuing operations attributable to the ordinary equity
holders. An entity shall present, basic and diluted earnings per share
with equal prominence for all periods presented (paragraph 66, IAS 33).

An entity that reports a discontinued operation shall disclose the

basic and diluted amounts per share for the discontinued operation
either on the face of the statement of comprehensive income or in the
notes to the financial statements (paragraph 68, IAS 33)

An entity shall preserit basic and diluted earnings per share,

even if the amounts are negative (paragraph 69, IAS 33).

An entity shall disclose the following (paragraph 70, IAS 33)

(a) the amounts used as the numerators in calculating basic

and diluted earnings per share, and a reconciliation of
those amounts to profit or loss attributable to the parent
entity for the period. The reconciliation shall include the
individual:effect of each class of instruments that affects
earnings per share;

(b) the weighted average number of ordinary shares used as

the denominator in calculating basic and diluted
earnings per share, and a reconciliation of these »

243

Scanned with CamScanner

 ~~
—=£arnin
PergSha
sre

denominators to each other. The reconciliation sha}

include the individual effect of each class of instruments
that affects earnings per share;

(c)._ instruments (including contingently issuable shares) that

could potentially dilute basic earnings per share in the
future but were not included in the calculation of diluted
earnings per share because they are anti-dilutive for the
period(s) presented; and

(d) a description of ordinary share transactions or potential

ordinary share transactions that occurred after the
reporting period and that would have _ changed
significantly the number of ordinary shares or potential
ordinary shares outstanding at the end of the period if
those transactions had occurred before the end of the
reporting period.

The earnings per share information is presented immediately

after profit is determined in the profit or loss statement (in a two-
statement format) or after the total comprehensive income (in a one-
statement form). For an illustration of its presentation, see chapter 3 of
’ this book.

RETROSPECTIVE ADJUSTMENTS

An entity shall retrospectively adjust the number of ordinary or

potential shares if it effects a capitalization, bonus issue, share split, or
reverse share split after the reporting period but before the date of the
issue of the financial statements. (par. 64, IAS 33). The EPS ‘calculation
shall be based on the new number of shares.

Likewise, the basic and earnings per share shall be adjusted for
errors or adjustments resulting from changes in accounting policies
accounted for retrospectively.

An entity shall disclose these retrospective adjustments

notes to the financial statements. in the

Scanned with CamScanner