About

IAS 33 deals with the calculation and presentation of earnings per share (EPS). It applies to entities whose ordinary shares or potential ordinary shares (for example, convertibles, options and warrants) are publicly traded. Non-public entities electing to present EPS must also follow the Standard.

An entity must present basic EPS and diluted EPS with equal prominence in the statement of comprehensive income. In consolidated financial statements, EPS measures are based on the consolidated profit or loss attributable to ordinary equity holders of the parent.

Dilution is a potential reduction in EPS or a potential increase in loss per share resulting from the assumption that convertible instruments are converted, options or warrants are exercised, or ordinary shares are issued upon the satisfaction of specified conditions.

When the entity also discloses profit or loss from continuing operations, basic EPS and diluted EPS must be presented in respect of continuing operations. Furthermore, if an entity reports a discontinued operation, it must present basic and diluted amounts per share for the discontinued operation either in the statement of comprehensive income or in the notes.

IAS 33 sets out principles for determining the denominator (the weighted average number of shares outstanding for the period) and the numerator (‘earnings’) in basic EPS and diluted EPS calculations.

The denominators used in the basic EPS and diluted EPS calculation might be affected by share issues during the year; shares to be issued upon conversion of a convertible instrument; contingently issuable or returnable shares; bonus issues; share splits and share consolidation; the exercise of options and warrants; contracts that may be settled in shares; and contracts that require an entity to repurchase its own shares (written put options).

IAS 33 requires an entity to disclose:

  • the amounts used as the numerators in calculating basic and diluted earnings per share, and a reconciliation of those amounts to profit or loss. 
  • the weighted average number of ordinary shares used as the denominator in calculating basic and diluted earnings per share, and a reconciliation of these denominators to each other. 
  • a description of any other instruments (including contingently issuable shares) that could potentially dilute basic earnings per share in the future, but that were not included in the calculation of diluted earnings per share.
  • a description of ordinary share transactions that occur after the reporting period and that could have changed the EPS calculations significantly if those transactions had occurred before the end of the reporting period.

What you should know

  • Know and apply the definitions related to earnings per share.
  • Calculate basic earnings per share.
  • Calculate diluted earnings per share.
  • Determine the weighted average number of ordinary shares outstanding.
  • Account for bonus issues, share splits and other changes in ordinary shares.
  • Present basic and diluted earnings per share for continuing and discontinued operations.
  • Disclose the amounts used in calculating earnings per share.
  • Explain the objective of IAS 33
  • Discuss the application and scope of IAS 33
  • Discuss the components of basic earnings per share and examine how it is measured
  • Explain the concept of diluted earnings per share and how it is measured
  • Explain the need for retrospective adjustment of earnings per share
  • Describe and apply the disclosure requirements of IAS 33.