AS 20 - Earning Per Share

  1. Introduction
  • Purpose: EPS provides insights into the earnings available for each equity share, crucial for evaluating share market price.
  • Requirement: Mandatory for assessing the financial health of a company; auditors require compliance for unqualified reports.
  1. Objective
  • To prescribe principles for determination and presentation of EPS, enhancing comparison across different enterprises and accounting periods.
  1. EPS Calculation
  • Basic Formula: Earnings available for equity shareholders / Number of equity shares.
  • Focus: Primarily on the denominator as earnings (numerator) can vary based on accounting methods.
  1. Applicability
  1. Financial Instruments
  • Includes assets that are cash, rights to receive cash, and contractual rights to exchange financial instruments, excluding owner's equity costs.
  1. Types of EPS Calculation
  • Basic EPS: Net profit/loss attributable to equity shareholders over the weighted average number of equity shares.
  • Diluted EPS: Includes potential equity shares in the capital structure, calculated by adjusting net profit attributable and average number of equity shares assuming conversion of dilutive potential equity shares.
  1. Disclosure
  • Detailed disclosure of numerator and denominator for basic and diluted EPS, including adjustments and reconciliation.
  1. Practical Examples
  • Computation of weighted average number of shares for various scenarios including issuance of equity shares, buy-back, and convertible debentures.
  1. Specific Situations and Calculations
  • Treatment of right issues, partly paid-up shares, convertible debentures, and other equity-related instruments in EPS calculation.
  1. Capitalization Rate and Adjustments
  • Adjustments for diluted EPS considering potential equity shares and associated financial instruments.
  1. Key Concepts
  • Importance of EPS in financial reporting and decision-making.
  • Application of AS 20 across different types of enterprises.
  • Significance of denominator adjustments in EPS calculation for accurate representation of earnings per share.
  • Listed companies, companies under Schedule III, and consolidated financial statements.