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EPS
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ACCOUNTING
STANDARD
20
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HOWTO
CALCULATEEARNINGS
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RESTATED
ENT BEPS
RE DILUTED
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PRESENT BASIC EPS
HOW TO CALCULATE
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PROFIT
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LESS:
TAX EXP.
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PAT
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LESS :
DIVIDEND
PAID/DECLARED/PROVIDED ONPREFERENCE
SHARES (UNCUMULATIVE)
DIVIDEND DUE ON PREFERENCESHARES (CUMULATIVE)
-CDT/DDT ON PREF.SHARES
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EARNINGS
AVAILABLE FOR
SHAREHOLDERS
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DIVIDE BY
WE
IGH
TED
PERIOD AMT
OF SHARES
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3 VARIABLES
TO BE
MULTIPLIED
IN NUMBEROFSHARES
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DAYS (RESOURCES WITH
THE COMPANY)(BONUS/SPLIT,MERGER,BON
US PART IN RIGHT FULLYEAR AS NO RESOURCES)
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SHARES NUMBER DAYS AMT (RECD) DIVIDEND
EXCL.PREMIUM RIGHT(MULT/INCR)
Opening ESC 365
Public IssueCalls Received
Bonus/split 365
PaidPortion Right
Free Portion Right 365
Less_ Buyback
Less- Forfeited
Amalgamation(merger) 365
Amalgamation(Purchase)
Partly Paid( if Voting Right)
Converted Shares
Allotted
Continegently issued Shares
(if all conditions fulfilled)
Weighted Equity Shares BXCXDXE
365
DILUTED
CONVERTIBLE
SHARE APPLICATION(BUS. USE)
Continegently Not fulfilled
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HOW TO CALCULATE
BONUS(FREE)PORTION
OF RIGHT
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RIGHTS ISSUE
(Accounting year 01-01-20X1 to 31-12-2011)
Net profit Year 20 x 0 : Rs. 11,00,000
Year 20 x 1 : Rs. 15,00,000
No. of shares outstanding prior to rights issue: 5,00,000
Rights issue One new share for each five outstanding (i.e. 1,00,000 new shares)
Rights issue price: Rs. 15.00
Last date to exercise rights : 1st March 20 X 1
Fair value of one equity share immediately prior to exercise of rights on 1st March 20 X 1 : Rs.
21.00
Computation of theoretical ex-rights fair value per share
Fair value of all outstanding shares immediately prior to exercise of rights + total amount received
from exercise
Number of shares outstanding prior to exercise + number of shares issued in the exercise.
= (Rs. 21.00 x 5,00,000 shares) + (Rs. 15.00 x 1,00,000 shares)
5,00,000 shares + 1,00,000 shares
Theoretical ex-rights fair value per share = Rs. 20.00
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RIGHTS ISSUE (CONTD.)
Computation of adjustment factor
= Fair value per share prior to exercise of rights = Rs. 21.00 = 1.05
Theoretical ex-rights value per share Rs. 20.00
Computation of earnings per share
Year 20 X 0 Year 20 x 1EPS for the year 20 x 0 as originally reported : Rs. 2.20
[Rs. 11,00,000 / 5,00,000 shares]
EPS for the year 20 x 0 restated for rights Rs. 2.10
[Issue : Rs. 11,00,000 / (5,00,000 shares x 1.05)]
EPS for the year 20 x 1 including effects of rights issue Rs.2.55
Rs. 15,00,000
(5,00,000 x 1.05 x 2/12) + (6,00,000 x 10/12)
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COMPUTATION OF FUTURE
CONSIDER EFFECT OF FUTURE EQUITY
(POTENTIAL SHARES i.e. Convertible Securities,Share Application etc Simply calculate EPS
as if they have already Converted in equityconsidering income effect and increase in no.of shares as follows )
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COMPUTATION OF DILUTED EARNINGS
(Accounting year 01-01-20XX to 31-12-20XX) Net profit for the current year Rs. 1,00,00,000
No. of equity shares outstanding 50,00,000
Basic earnings per share Rs. 2.00
No. of 12% convertible debentures of Rs. 100 each 1,00,000
Each debenture is convertible into 10 equity shares
Interest expense for the current year Rs. 12,00,000
Tax relating to interest expense (30%) Rs. 3,60,000
Adjusted net profit for the current year (Rs. 1,00,00,000 + 12,00,000 3,60,000) = Rs.
1,08,40,000
No. of equity shares resulting from conversion 10,00,000
of debentures
No. of equity shares used to compute 50,00,000 + 10,00,000 = 60,00,000
diluted earnings per share
Diluted earnings per share 1,08,40,000 / 60,00,000 = Re. 1.81
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Matters
Potential Equity Shares
o Anti- Dilutive When?
o Process ofDetermination of Dilutive
/ Anti-Dilutive
o If conversion increases
earnings / decreases
loss
o Consider each seriesseparately
o Sequence such
consideration in
descending order of
dilution
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