INDAS 33.pptx

IND AS 33

1. INDAS 33

2. Earnings per share is a method used to review the performance of an entity. As the term itself denotes it simply means determining the profit attributable to each share. Such information is required to understand the return on investment for the shareholders and prospective investors.   Indian Accounting Standard 33 – Earnings per Share

3. What is the objective of the standard? The objective of the standard is to provide a common parameter for reviewing the performance of the entities and compare the same. Also, the computation can be used for reviewing the performance of the entity between different periods.

4. EPS of Reliance Ltd

5. Earnings Per Share OF Ultra tech cement Basic Earnings Per Share (“EPS”) is computed by dividing the net profit / (loss) after tax for the year attributable to the equity shareholders by the weighted average number of equity shares outstanding during the year. The weighted average number of equity shares outstanding during the year is adjusted for treasury shares. For the purpose of calculating diluted earnings per share, net profit / (loss) after tax for the year attributable to the equity shareholders is divided by the weighted average number of equity shares which could have been issued on the conversion of all dilutive potential equity shares and is adjusted for the treasury shares held by the Company to satisfy the exercise of the share options by the employees.

6. EARNINGS PER SHARE (EPS) ( Ind AS 33) of Utratech Cement

7.  What is the scope of the standard? This standard requires that if an entity computes earnings per share then it must calculate and disclose the same as per this standard. Further, this standard requires that if an entity presents both Consolidated financial statements and Separate financial statements as per the standards then it must present the earnings per share in both the statements separately The standard prescribes two methods for measurement of earnings per share: Basic earnings per share  Diluted earnings per share

8. definitions An ordinary share is an equity instrument that is subordinate to all other classes of equity instruments. A potential ordinary share is a financial instrument or other contract that may entitle its holder to ordinary shares. (a). financial liabilities or equity instruments, including preference shares, that are convertible into ordinary shares; (b) options and warrants; (c) shares that would be issued upon the satisfaction of conditions resulting from contractual arrangements, such as the purchase of a business or other assets. A contingent share agreement is an agreement to issue shares that is dependent on the satisfaction of specified conditions.

9. Anti dilution is an increase in earnings per share or a reduction in loss per share resulting from the assumption that convertible instruments are converted, that options or warrants are exercised, or that ordinary shares are issued upon the satisfaction of specified conditions Dilution is a reduction in earnings per share or an increase in loss per share resulting from the assumption that convertible instruments are converted, that options or warrants are exercised, or that ordinary shares are issued upon the satisfaction of specified conditions. Options, warrants and their equivalents are financial instruments that give the holder the right to purchase ordinary shares. Put options on ordinary shares are contracts that give the holder the right to sell ordinary shares at a specified price for a given period. Definitions( COND.)

10. Basic earnings per share (Basic EPS)  will be calculated by dividing the profit or loss attributable to ordinary equity holders of the entity by the weighted average number of ordinary shares outstanding for the period.  This computation enables in understanding the earnings attributable to each ordinary share.  For the purpose of calculating basic earnings per share, the number of ordinary shares shall be the weighted average number of ordinary shares outstanding during the period.

11. weighted average number of ordinary shares The weighted average number of ordinary shares outstanding during the period is the number of ordinary shares outstanding at the beginning of the period, adjusted by the number of ordinary shares bought back or issued during the period multiplied by a time-weighting factor

12. EX .Company P’s profit attributable to its ordinary shareholders for Year 1 is 4,600,000. P has a simple capital structure comprising 3,000,000 ordinary shares. ANS -Basic EPS calculation Profit attributable for Year 1-to ordinary shareholders of P: 4,600,000. Weighted-average number of ordinary shares outstanding during Year 1: 3,000,000. Basic EPS for Year 1 is therefore 1.53 (4,600,000 / 3,000,000).

13. Diluted earnings per share The diluted earnings per share are computed by adjusting the profit or loss and ordinary shares for the effects of all dilutive potential ordinary share. The numerator will be the profit or loss as computed for basic earnings per share adjusted by the after-tax effect of the dividends or any other items that are related to dilutive potential ordinary shares that are deducted in computing basic earnings per share. interest in the period related to dilutive potential ordinary shares that are recognized changes in income or expense that would be due to the conversion of the dilutive potential ordinary share.  

14. disclosure requirements (a) the amounts used as the numerators in calculating basic and diluted earnings per share and a reconciliation to the profit or loss. (b) the weighted average number of ordinary shares used as the denominator in calculating basic and diluted earnings per share and a reconciliation of the denominators to each other.  (c) instruments (including contingently issuable shares) that could potentially dilute basic earnings per share in the future, but were not included in the calculation of diluted earnings per share because they are anti-dilutive for the period(s) presented. (d) description of ordinary share transaction or potential ordinary share transactions

15. Example 1 – Weighted average number of shares This example shows the calculation of the weighted average number of ordinary shares.

16. Example-2 – Bonus issue shows the impact of a bonus issue on the calculation of earnings per share.

17. EX-3 -A’s year end is 31 December. The following transactions in shares took place during the year ended 31 December 20X1:

18. QUESTION 4 A had four million ordinary shares in issue and ranking for dividend at 1 January 20X1. On 30 September, one million further shares were issued. Earnings for the year ended 31 December 20X1 were 50,000,000 ANS The number of shares would be time apportioned as follows: 1 Jan–30 Sep: 4,000,000 *9/12= 3,000,000 30 Sept–31 Dec: 5,000,000 *3/12= 1,250,000 Weighted average number of shares= 4,250,000 Earnings per share are -50,000,000/4,250,000= 11.76

19. EXAMPLE-5--B has four million ordinary shares in issue at 1 January 20X1. On 30 September the entity made a bonus issue of 1 for 4. Earnings for the year ended 31 December 20X1 were 50,000,000. The EPS for 20X0 was 9 cents per share. ANS -5- The number of shares would be: = 4,000,000X 5/ 4= 5,000,000 EPS would be =50,000,000/ 5,000,000 =10 % The EPS for the previous year’s comparative is restated using the bonus fraction= 20X1 EPS= 9X4/5=7.2 per share

20. EX.6 -N’s reported earnings for the year ended 31 March 20X4 were 300 million. On 1 December 20X3 the directors decided to declare a special dividend of 1,500,000. The 1,000,000 ,Rs1 ordinary shares would be consolidated on a 2:1 basis. One new share would be issued for every two old shares held. The basic earnings per share for the year ended 31 March 20X3 was Rs 200 per share. Calculate the basic earnings per share year ended 31 March 20X4 with comparatives.

21. ANS 6 - The reduction in shares is compensated by the special dividend. There is an outflow of resources from N and so the EPS is calculated using a weighted average number of shares and the comparative is not affected. 1 April 20X3 to 30 November 20X3 1,000,000 X 8/12 =666,667 1 December 20X3 to 31 March 20X4 500,000 X 4/12 =166,667 Total weighted average number of shares = 833,334 20X4 Basic EPS (30,00,00,000/833,334) =360 20X3 Basic EPS no change =200

22. Example 7 : Number of shares outstanding as on 01-01-2010 are 2000. Fresh issue of 600 shares for cash on 31-05-2010. Buy back of 300 shares on 01-11-2010. Solution : The weighted average outstanding number of shares = (2000 x 12/12) + (600 x 7/12) – (300 x 2/12) = 2300 shares

23. Example 8 : On 01-01-2010, 2 Lac equity shares of Rs . 10 each fully paid up. On 30-06-2010, fresh issue of 2 lac equity shares of Rs . 5 each fully paid up. Solution : The weighted average outstanding number of shares = (2,00,000 x 12/12) + (2,00,000 x 5/10 x 6/12) = 2,50,000 shares

24. Example 9 : Net profit for the year 2010 is Rs . 18 lacs . Net profit for the year 2011 is Rs . 60 lacs . Number of equity shares outstanding till 30-09-2010 is 20 lacs . Bonus issue on 01-10-2011 = 2 (new): 1(old). Calculate EPS for the year 2011 and adjusted EPS for the year 2010. Solution : As per AS 20, when bonus shares are issued during the year, it should be calculated in the weighted average from the beginning of reporting period irrespective of issue date. Therefore, the bonus issue is treated as if it had occurred prior to the beginning of the year 2010, the earliest period reported. Particulars Amount (in Rs.) Net profit for the year 2010 18,00,000 Net profit for the year 2011 60,00,000 Number of equity shares outstanding till 30-09-2011 20,00,000 Bonus issue on 01-10-2011 20,00,000 x 2 = 40,00,000 Earnings per share for the year 2011 60,00,000 /(20,00,000 + 40,00,000) = Re. 1 Adjusted Earnings per share for the year 2010 18,00,000 / (20,00,000 + 40,00,000) = Re. 0.30

25. Example 10 : Net profit for the year 2010 is Rs . 1,100,000 and for the year 2011 is Rs . 1,500,000. Number of shares outstanding prior to right are 5,00,000 shares. Right issue of one new share for each five outstanding at right issue price of Rs . 15. Last date to exercise rights is 01-03-2011. Fair value of one equity share immediately prior to exercise of rights on 01-03-2011 is Rs . 21. Compute basic EPS for the year 2011 and adjusted EPS for the year 2010. Solution :, Theoretical ex-rights fair value per share= (Fair value of all shares prior to rights + Right issue proceeds) / Number of shares outstanding post right issue = {( Rs . 21 x 5,00,000 shares) + ( Rs . 15 x 1,00,000 shares)} / 5,00,000 shares + 1,00,000 shares = Rs . 20 Bonus element = Fair value per share prior to exercise of rights / Theoretical ex-rights value per share   = 20 / 21 = 1.05 Computation of Earnings Per Share Particulars 2010 2011 EPS for the year 2010 as originally reported: Rs . 1,100,000/5,00,000 shares Rs. 2.20 EPS for the year 2010 as restated for rights issue: Rs . 1,100,000/(5,00,000 shares x 1.05) Rs. 2.10 EPS for the year 2011 including effects of right issue Rs . 1,500,000 / {(5,00,000 x 1.05 x 2/12) + (6,00,000 x 10/12)} Rs . 2.55

26. EX.11 Particulars Amount Net profit for the current year Rs. 1,00,00,000 Number of equity shares outstanding 50,00,000 Basic EPS 1,00,00,000/50,00,000 = 2 Number of 12% convertible debentures of Rs. 100 each Each debenture is convertible into 10 equity shares 1,00,000 Interest expense for the current year Rs. 12,00,000 Tax relating to interest expense (30%) Rs . 3,60,000 Particulars Amount Adjusted Net profit for the current year Rs. (1,00,00,000 + 12,00,000 – 3,60,000) = Rs. 1,08,40,000 Number of equity shares resulting from conversion of debentures 10,00,000 Number of equity shares used to calculate diluted earnings per share 50,00,000 + 10,00,000 = 60,00,000 Diluted earnings per share 1,08,40,000/60,00,000 = Rs . 1.81

27. Q. Net profit for the year 2019 is Rs . 100,000 and for the year 2020 is Rs . 1,50,000. Number of shares outstanding prior to right are 50,000 shares. Right issue of one new share for each ten outstanding at right issue price of Rs . 15. . Last date to exercise rights is 01-03-2020 Fair value of one equity share immediately prior to exercise of rights on 01-03-2020 is Rs . 20. Compute Basic EPS FOR 2019 Theoretical ex-rights fair value per share Bonus element EPS for the year 2019 as restated for rights issue: EPS for the year 2020 including effects of right issue Ans. -2, 19.54, 1.025, 1.95, 2.76

28. 1.= 100000/50000=2 2.=50000X20+5000X15/50000+5000=19.54 3.=20/19.54=1.025 4.=100000/50000X1.025=1.95 5.=150000/50000x1.025x2/12+55000x10/12=150000/8542+45833 =150000/54375=2.76

29. Rahul ltd had 75000 ordinary shares at 1 January 2018. On 30 june , 15000 further shares were issued. Earnings for the year ended 31 December 2018 were 90000 No.of Weighted Shares EPS For 2018 Ans 82500,1.09

30. QUIZZZ which agreement to issue shares that is dependent on the satisfaction of specified conditions contingent share agreement Antidilution Dilution Put options 2. potential ordinary share Includes equity instruments convertible into ordinary shares options and warrants shares that would be issued under contractual arrangements All of the above

31. 3. Which is an increase in earnings per share resulting from the assumption that convertible instruments are converted. contingent share agreement Anti dilution Dilution Put options 4. Which is a reduction in earnings per share resulting from the assumption that convertible instruments are converted contingent share agreement Anti dilution Dilution Put options

32. 5.Which financial instruments that give the holder the right to purchase ordinary shares Dilution Options, warrants Anti dilution Call money 6. Which is on ordinary shares are contracts that give the holder the right to sell ordinary shares at a specified price for a given period Dilution Antidilution Call money Put Option

33. 7. IND AS 33 relates to Impairment loss Business combination Earning per share None of these 8. Earnings per share is a method used to review the performance of an entity. True false

34. 9. IND AS 33-EPS ,does not provides information is required to understand the return on investment for the shareholders and prospective investors. True false    10. IND AS 33-EPS provides a common parameter for reviewing the performance of the entities and compare the same between different periods also True false

35. 11.  will be calculated by dividing the profit or loss attributable to ordinary equity holders of the entity by the weighted average number of ordinary shares outstanding for the period.  Basic earning per share (Basic EPS) Diluted earning per share (Diluted EPS) 12. This computation enables in understanding the earnings attributable to each ordinary share.  Basic earning per share (Basic EPS) Diluted earning per share (Diluted EPS)

36. 13. ……………..outstanding during the period is the number of ordinary shares outstanding at the beginning of the period, adjusted by the number of ordinary shares bought back or issued during the period multiplied by a time-weighting factor Basic earning per share (Basic EPS) Diluted earning per share (Diluted EPS) The weighted average number of ordinary shares None of the above 14. ………are computed by adjusting the profit or loss and ordinary shares for the effects of all dilutive potential ordinary share. Basic earning per share (Basic EPS) Diluted earning per share (Diluted EPS)

37. FILL IT…….. 205000 ,diluted earnings per share, 7500,Earning per share(EPS), 5, 37500 IND AS 33 IS RELATED TO……… …………………….are computed by adjusting the profit or loss and ordinary shares for the effects of all dilutive potential ordinary share. A had 20,000 shares in issue at 1 January 20X1. On 30 September, 10000 further shares were issued. Earnings for the year ended 31 December 20X1 were 1,12,500 ,so EPS is…… On 01-01-2010, - 20,000 share of Rs . 10 each fully paid up. On 30-10-2010, fresh issue of 5,000 equity shares of Rs . 6 each fully paid up. entity made a bonus issue of 1 for 4, and have 30,000 shares so no.of bonus shares issued by company is…………… entity made a bonus issue of 1 for 4, and have 30,000 shares So total no. of shares of company is….

38. 1. is a reduction in earnings per share a. Objective of indas 33 2. Disclosure requirement b. Dilution 3. agreement to issue shares that is dependent on the satisfaction of specified conditions c. amounts used as the numerators in calculating basic and diluted earnings per share 4. for reviewing the performance of the entity between different periods d. Basic EPS 5. dividing the profit or loss attributable to ordinary equity holders of the entity by the weighted average number of ordinary shares outstanding for the period e. Contingent share agreement

39. a. Options, warrants and their equivalents 1. description of ordinary share transaction or potential ordinary share transactions b. ordinary shares outstanding at the beginning , adjusted by the number of ordinary shares bought back or issued during the period 2. The diluted earnings per share are computed by adjusting the profit or loss and ordinary shares for the effects of all dilutive potential ordinary share. c. Disclosure requirement 3. Weighted average number of shares d. Diluted EPS 4. financial instruments that give the holder the right to purchase ordinary shares