Diluted earnings per share
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(Diluted EPS).
'Basic' earnings per share are calculated as:
Profit attributable to ordinary shareholders ÷ Weighted average number of shares in issue during the period.
'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 for financial reporting purposes in IAS 33 as:
A reduction in earnings per share resulting from the assumption that:
- Convertible instruments are converted,
- Options or warrants are exercised, or
- Ordinary shares are issued upon the satisfaction of specified conditions.
Relevant accounting standards include IAS 33 and Section 1 of FRS 102.
