IAS 33 Earnings per Share

This revised Standard supersedes IAS 33 (1997) Earnings Per Share and should be applied for annual periodsbeginning on or after 1 January 2005. Earlier application is encouraged.

Contents


paragraphs
Introduction IN1-IN3
International Accounting Standard 33 Earnings perShare
Objective 1
Scope 2-4
Definitions 5-8
Measurement 9-63
Basic Earnings per Share 9-29
Earnings 12-18
Shares 19-29
Diluted Earnings per Share 30-63
Earnings 33-35
Shares 36-40
Dilutive Potential Ordinary Shares 41-63
Options, warrants and their equivalents45-48
Convertible instruments 49-51
Contingently issuable shares 52-57
Contracts that may be settled in ordinaryshares or cash 58-61
Purchased options 62
Written put options 63
Retrospective adjustments 64-65
Presentation 66-69
Disclosure 70-73
Effective date 74
Withdrawal of other pronouncements 75-76
Appendices:
A. Application Guidance
B. Amendments to Other Pronouncements
Approval of IAS 33 by the Board
Basis for conclusions
Illustrative examples
Table of concordance

International Accounting Standard 33 Earningsper Share (IAS 33) is set out in paragraphs 1-76 and Appendices A and B.All the paragraphs have equal authority but retain the IASC format of theStandard when it was adopted by the IASB. IAS 33 should be read in the contextof its objective and the Basis for Conclusions, thePreface toInternational Financial Reporting Standards and the Frameworkfor the Preparation and Presentation of Financial Statements. IAS 8 Accounting Policies, Changes in Accounting Estimates and Errorsprovidesa basis for selecting and applying accounting policies in the absence ofexplicit guidance.

Introduction


IN1. International Accounting Standard 33 Earnings per Share (IAS 33) replaces IAS 33Earnings Per Share (issued in 1997), and should be applied forannual periods beginning on or after 1 January 2005. Earlier application isencouraged. The Standard also replaces SIC-24 Earnings PerShare-Financial Instruments and Other Contracts that May Be Settled in Shares.

Reasons for Revising IAS 33


IN2. The International Accounting StandardsBoard has developed this revised IAS 33 as part of its project on Improvementsto International Accounting Standards. The project was undertaken in the lightof queries and criticisms raised in relation to the Standards by securitiesregulators, professional accountants and other interested parties. Theobjectives of the project were to reduce or eliminate alternatives,redundancies and conflicts within the Standards, to deal with some convergenceissues and to make other improvements.
IN3. For IAS 33 the Board's main objectivewas a limited revision to provide additional guidance and illustrative exampleson selected complex matters, such as the effects of contingently issuableshares; potential ordinary shares of subsidiaries, joint ventures orassociates; participating equity instruments; written put options; purchasedput and call options; and mandatorily convertible instruments. The Board didnot reconsider the fundamental approach to the determination and presentationof earnings per share contained in IAS 33.

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Superseded IAS 33 paragraph     Current IAS 33 paragraph     Superseded IAS 33 paragraph     Current IAS 33 paragraph
Objective    1    20    26
1    2    21    27
2    4    22    28
3    None    23    A2
4    3    Examples following paragraph 23    Illustrative Examples 3 and 4
5    3    24    31
6    5    25    32
7    6    26    33
8    7    27    34
9    8    Example following paragraph 27    Illustrative Example 6
10    10    28    35
11    12    29    36
12    13    30    39
13    14    31    52
14    19    32    40
15    20    33    45
Example following paragraph 15    Illustrative Example 2    34    45, A4
16    21    35    46
17    22    Example following paragraph 35    Illustrative Example 5
18    A15    36    None
19    24, 25    53    74
37    A16    SIC-24    58-61
38    41    None    IN1-IN3
39    42    None    9
40    43    None    11
41    44    None    15-18
Example following paragraph 41    Illustrative Example 9    None    23
42    38    None    29, 30
43    64    None    37
44    65    None    47-51
45    70(d), 71    None    53-57
46    71    None    62, 63
47    66    None    67, 68
48    69    None    70(c)
49    70(a), (b)    None    75, 76
50    72    None    A1
51    73    None    A3
52    None    None    A5-A14
          None    Illustrative Examples 1, 7, 8, 10, 11, 12

Table of Concordance
This table shows how the contents of the superseded version of IAS 33 and the current version of IAS 33 correspond. Paragraphs are treated as corresponding if they broadly address the same matter even though the guidance may differ.
This table also shows how the requirements of SIC Interpretation SIC-24 have been incorporated into the current version of IAS 33.

     First quarter    Second quarter    Third quarter    Fourth quarter    Full year
     CU    CU    CU    CU    CU
Basic EPS
Profit (loss) from continuing operations    0.98    1.10    0.15    (0.10)    1.93
Loss from discontinuing operations    --    --    (0.31)    --    (0.33)
Profit (loss)    0.98    1.10    (0.16)    (0.10)    1.60
Diluted EPS
Profit (loss) from continuing operations    0.80    1.00    0.15    (0.10)    1.78
Loss from discontinuing operations    --    --    (0.30)    --    (0.30)
Profit (loss)    0.80    1.00    (0.15)    (0.10)    1.48

The following illustrates how Company A might present its earnings per share data on its income statement. Note that the amounts per share for the loss from discontinuing operations are not required to be presented on the face of the income statement.
     For the year ended 20X1
     CU
Earnings per ordinary share
Profit from continuing operations    1.93
Loss from discontinuing operations    (0.33)
Profit    1.60
Diluted earnings per ordinary share
Profit from continuing operations    1.78
Loss from discontinuing operations    (0.30)
Profit    1.48
The following table includes the quarterly and annual earnings per share data for Company A. The purpose of this table is to illustrate that the sum of the four quarters' earnings per share data will not necessarily equal the annual earnings per share data. The Standard does not require disclosure of this information.

Warrants    14,880    (m)    
Convertible preference shares    450,000    (n)    
5% convertible bonds    120,000    (o)    
Dilutive potential ordinary shares              584,880
Adjusted weighted-average shares              6,661,547
Diluted EPS              
Profit from continuing operations              CU1.78
Loss from discontinuing operations              (CU0.30)
Profit         CU1.48
(l) (CU12,000,000×5%) ÷ 4; less taxes at 40%

(m) [(CU57.125* – CU55) ÷ CU57.125]×600,000 = 22,320 shares; 22,320×8/12 = 14,880 shares * The average market price from 1 January 20X1 to 1 September 20X1

(n) (800,000 shares × 5/12) + (200,000 shares × 7/12)

(o) 480,000 shares × 3/12

Note: The incremental shares from assumed conversions are not included in calculating the diluted per-share amounts because the control number (loss from continuing operations attributable to ordinary equity holders of the parent entity adjusted for preference dividends) was negative (ie a loss, rather than profit).
Full Year 20X1
Basic EPS calculation
     CU
Profit from continuing operations attributable to the parent entity    11,800,000
Less: preference shares dividends    (70,000)
Profit from continuing operations attributable to ordinary equity holders of the parent entity    11,730,000
Loss from discontinuing operations attributable to the parent entity    (2,000,000)
Profit attributable to ordinary equity holders of the parent entity    9,730,000
Dates    Shares Outstanding    Fraction of period    Weighted- average shares
1 January - 28 February    5,000,000    2/12    833,333
Issue of ordinary shares on 1 March    200,000          
1 March - 31 March    5,200,000    1/12    433,333
Conversion of 5% bonds on 1 April    480,000          
1 April -31 May    5,680,000    2/12    946,667
Conversion of preference shares on 1 June    600,000          
1 June-31 August    6,280,000    3/12    1,570,000
Exercise of warrants on 1 September    600,000          
1 September-31 December    6,880,000    4/12    2,293,333
Weighted-average shares              6,076,667
Basic EPS              
Profit from continuing operations         CU1.93
Loss from discontinuing operations         (CU0.33)
Profit    CU 1.60
Diluted EPS calculation              
Profit from continuing operations attributable to ordinary equity holders of the parent entity              CU11,730,000
Plus: profit impact of assumed conversions              
Preference share dividends    CU70,000          
Interest on 5% convertible bonds    CU90,000    (l)    
Effect of assumed conversions              CU160,000
Profit from continuing operations attributable to ordinary equity holders of the parent entity including assumed conversions              CU11,890,000
Loss from discontinuing operations attributable to the parent entity              (CU2,000,000)
Profit attributable to ordinary equity holders of the parent entity including assumed conversions              CU9,890,000
Weighted-average shares              6,076,667
Plus: incremental shares from assumed conversions              

(k) [(CU65-CU55) ÷ CU65] × 600,000 = 92,308 shares; 92,308 × 2/3 = 61,538 shares
Note: The incremental shares from assumed conversions are included in calculating the diluted per-share amounts for the loss from discontinuing operations and loss even though they are antidilutive. This is because the control number (profit from continuing operations attributable to ordinary equity holders of the parent entity, adjusted for preference dividends) was positive (ie profit, rather than loss).
Fourth Quarter 20X1
Basic and diluted EPS calculation
     CU
Loss from continuing operations attributable to the parent entity    (700,000)
Add: preference shares dividends    (10,000)
Loss attributable to ordinary equity holders of the parent entity    (710,000)
Dates    Shares outstanding    Fraction of period    Weighted- average shares
1 October - 31 December    6,880,000    3/3    6,880,000
Weighted-average shares              6,880,000
Basic and diluted EPS              
Loss attributable to ordinary equity holders of the parent entity         (CU0.10)

Profit from continuing operations attributable to ordinary equity holders of the parent entity         CU990,000
Plus: profit impact of assumed conversions          
Preference shares dividends    CU10,000    
Effect of assumed conversions         CU10,000
Profit from continuing operations attributable to ordinary equity holders of the parent entity including assumed conversions         CU1,000,000
Loss from discontinuing operations attributable to the parent entity         (CU2,000,000)
Loss attributable to ordinary equity holders of the parent entity including assumed conversions         (CU1,000,000)
          
Weighted-average shares         6,480,000
Plus: incremental shares from assumed conversions          
Warrants    61,538    
Convertible preference shares    200,000    
Dilutive potential ordinary shares         261,538
Adjusted weighted-average shares         6,741,538
Diluted EPS          
Profit from continuing operations         CU0.15
Loss from discontinuing operations         (CU0.30)
Loss    (CU0.15)