Question on EPS

[aditigulati]

I have a query on EPS in DIPifr module 1, self examination qestion1. Why are we recalculating Basic EPS for 2005. Also why are we dividing the 2005 existing EPS with adjustment factor to arrive at the revised EPS.

[Ian]

According to IAS 33, Earning per share,
If the number of ordinary or potential ordinary shares outstanding increases as a result of a capitalisation, bonus issue or share split, or decreases as a result of a reverse share split, the calculation of basic and diluted earnings per share for all periods presented shall be adjusted retrospectively. If these changes occur after the reporting period but before the financial statements are authorised for issue, the per share calculations for those and any prior period financial statements presented shall be based on the new number of shares. The fact that per share calculations reflect such changes in the number of shares shall be disclosed.

In case of right shares if it contains the bonus element it should be adjusted retrospectively. Besides EPS should be comparable from one period to another for more details refer page 9.17 of DIP IFRS module I.

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[Ian]

According to IAS 33, Earning per share

If the number of ordinary or potential ordinary shares outstanding increases as a result of a capitalisation, bonus issue or share split, or decreases as a result of a reverse share split, the calculation of basic and diluted earnings per share for all periods presented shall be adjusted retrospectively. If these changes occur after the reporting period but before the financial statements are authorised for issue, the per share calculations for those and any prior period financial statements presented shall be based on the new number of shares. The fact that per share calculations reflect such changes in the number of shares shall be disclosed.

Since the right shares as in problem has an bonus element it has to be stated retrospectively. I hope this will solve your problem.

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