IFRS Essentials

IAS 33 EARNINGS PER SHARE

1 INTRODUCTION AND SCOPE

Earnings per share are calculated by dividing a measure of profit or loss (numerator) by a number of shares (denominator). IAS 33 contains specific rules for this calculation, which are dealt with in this chapter. The objective of earnings per share information is to provide a measure of the interest of each ordinary share in the performance of an entity (IAS 33.11 and 33.32).

The determination and presentation of earnings per share is only necessary for (IAS 33.2):

• entities whose equity instruments are already traded in a public market (e.g. a domestic or foreign stock exchange), and
• for entities that file, or are in the process of filing, their financial statements with a securities commission (or other regulatory organization) for the purpose of issuing ordinary shares in a public market.

2 ORDINARY SHARES AND POTENTIAL ORDINARY SHARES

IAS 33 defines an ordinary share as an equity instrument that is subordinate to all other classes of equity instruments with regard to the participation in profit for the period (IAS 33.5–33.6).

A potential ordinary share is a financial instrument or other contract that may entitle its holder to ordinary shares (IAS 33.5), e.g. a convertible bond or an option.

3 BASIC EARNINGS PER SHARE

Basic earnings per share are calculated as follows (IAS 33.9–33.10):

The numerator comprises all items that ...