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AS 20 - Earning Per Share - Coggle Diagram
AS 20 - Earning Per Share
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.
Objective
To prescribe principles for determination and presentation of EPS, enhancing comparison across different enterprises and accounting periods.
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.
Applicability
Listed companies, companies under Schedule III, and consolidated financial statements.
Financial Instruments
Includes assets that are cash, rights to receive cash, and contractual rights to exchange financial instruments, excluding owner's equity costs.
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.
Disclosure
Detailed disclosure of numerator and denominator for basic and diluted EPS, including adjustments and reconciliation.
Practical Examples
Computation of weighted average number of shares for various scenarios including issuance of equity shares, buy-back, and convertible debentures.
Specific Situations and Calculations
Treatment of right issues, partly paid-up shares, convertible debentures, and other equity-related instruments in EPS calculation.
Capitalization Rate and Adjustments
Adjustments for diluted EPS considering potential equity shares and associated financial instruments.
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.