Earnings per share

Earnings per share (IAS 33) is required for entities whose ordinary shares are publicly traded (or being issued publicly). Basic and diluted EPS are presented in the statement of profit or loss for profit attributable to ordinary equity holders of the parent — and for continuing operations — with equal prominence, even when negative.

Basic EPS = earnings ÷ weighted average number of ordinary shares outstanding. - Earnings: profit attributable to ordinary equity holders of the parent — after the non-controlling interest's share and after preference dividends on preference shares classified as equity (cumulative ones for the period, whether or not declared; non-cumulative ones only if declared). - Weighted average shares: shares outstanding for each part of the year, weighted by time. Shares issued for cash count from the date the consideration is receivable; treasury shares bought back are excluded from the date of purchase. - Bonus issues, share splits and the bonus element of a rights issue add shares without any new resources. They are treated as if they had happened at the start of the earliest period presented, and comparative EPS is restated.

Diluted EPS adjusts for all dilutive potential ordinary shares: - Options and warrants — the treasury stock method: assume exercise and that the proceeds buy back shares at the average market price. Only the shares effectively issued for nothing are added: options − options × exercise price ÷ average market price. No adjustment to earnings. - Convertible bonds and preference shares — the if-converted method: add back the after-tax interest (or preference dividends) that would be saved, and add the shares that would be issued. - A potential share is included only if it is dilutive — it reduces EPS (or increases loss per share) from continuing operations. Instruments are considered from most to least dilutive, and anti-dilutive ones are excluded. The control number is profit from continuing operations (IAS 33.41–42): if a potential share is anti-dilutive on that figure, it is left out of every diluted EPS figure, including the one for total profit — even when the entity's total result is a profit. When there is a loss from continuing operations, options and convertibles are usually anti-dilutive, so diluted equals basic.

Under US GAAP, ASC 260 is largely converged with IAS 33; differences are mostly in detail, such as how year-to-date diluted EPS is computed for interim periods.