Wiley Interpretation and Application of IFRS Standards

27Earnings PER Share

1. Introduction
2. Scope
3. Definitions of Terms
4. Concepts, Rules and Examples
   1. Simple Capital Structure
      1. Computational Guidelines
      2. Numerator
      3. Denominator
   2. Complex Capital Structure
   3. Determining Dilution Effects
      1. Options and warrants
      2. Convertible instruments
   4. Contingent Issuances of Ordinary Shares
   5. Contracts Which May Be Settled in Shares or for Cash
      1. Written put options
   6. Sequencing of Dilution Effects
   7. Presentation and Disclosure Requirements Under IAS 33
5. Example of Financial Statement Disclosures
6. US GAAP Comparison

Introduction

The IFRS governing the calculation and disclosure of earnings per share (EPS) is IAS 33. According to IAS 1, if an entity presents the components of profit or loss in a separate statement of profit or loss, it should present basic and fully diluted EPS (or one EPS measure, if applicable) in that separate statement. The principal goal in these measures is to calculate the interest of potential ordinary shares in the performance of an entity. When the entity's capital structure is simple, EPS is computed by simply dividing profit or loss by the average number of outstanding equity shares. The computation becomes more complicated with the existence of securities that, while not presently equity shares, have the potential of causing additional equity shares to be issued in future, thereby diluting each currently outstanding share's claim to future earnings. Examples of such dilutive securities include convertible preference shares and convertible debt, ...