Diluted earnings per share: Difference between revisions
imported>Doug Williamson (Update for FRS 102) |
imported>Doug Williamson (Add example & link with Earnings page.) |
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'Basic' earnings per share are calculated as: | 'Basic' earnings per share are calculated as: | ||
Profit attributable to ordinary shareholders ÷ | Profit attributable to ordinary shareholders ÷ Diluted weighted average number of shares in issue during the period. | ||
Profit after tax attributable to ordinary shareholders is often known as 'earnings' or 'net profit'. | |||
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'Dilution' is defined | 'Dilution' is defined in IAS 33 as: | ||
The reduction in EPS assuming that the number of shares increases because: | |||
#Convertible instruments are converted, | #Convertible instruments are converted, | ||
#Options or warrants are exercised, or | #Options or warrants are exercised, or | ||
#Ordinary shares are issued | #Ordinary shares are issued on the satisfaction of specified conditions. | ||
Relevant accounting standards include IAS 33 and Section 1 of FRS 102. | Relevant accounting standards include IAS 33 and Section 1 of FRS 102. | ||
<span style="color:#4B0082">'''''Diluted EPS example'''''</span> | |||
Earnings for the period are £40 million and the diluted number of shares is 52 million. | |||
EPS = £40m / 52m | |||
= £0.77 (= 77 pence) | |||
Revision as of 10:45, 1 May 2017
(Diluted EPS).
'Basic' earnings per share are calculated as:
Profit attributable to ordinary shareholders ÷ Diluted weighted average number of shares in issue during the period.
Profit after tax attributable to ordinary shareholders is often known as 'earnings' or 'net profit'.
'Diluted' earnings per share are calculated by adjusting the earnings and number of shares for the effects of 'dilution' of the current ordinary shareholders' entitlements.
'Dilution' is defined in IAS 33 as:
The reduction in EPS assuming that the number of shares increases because:
- Convertible instruments are converted,
- Options or warrants are exercised, or
- Ordinary shares are issued on the satisfaction of specified conditions.
Relevant accounting standards include IAS 33 and Section 1 of FRS 102.
Diluted EPS example
Earnings for the period are £40 million and the diluted number of shares is 52 million.
EPS = £40m / 52m
= £0.77 (= 77 pence)
