IAS 33 EPS | LEC 06 PART A PRACTICE EXAMPLE 18 and Diluted EPS | HM Rana

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IAS 33, Earnings per Share (EPS), plays a crucial role in understanding a company's profitability and value for shareholders. Here are some key concepts to grasp:

1. Basic vs. Diluted EPS:

Basic EPS: Represents earnings solely attributed to outstanding ordinary shares during the period. Simple calculation using profit attributable to ordinary shareholders and weighted average number of ordinary shares.
Diluted EPS: Considers potential ordinary shares that could be issued based on existing convertible instruments, options, or warrants. Aims to show potential future dilution of earnings for existing shareholders.
2. Weighted Average Number of Shares:

Represents the average number of ordinary shares outstanding throughout the period. Accounts for share issuances, repurchases, and other changes in share capital. Crucial for accurate EPS calculations.
3. Potential Ordinary Shares:

Instruments that could be converted into ordinary shares under certain conditions, like convertible bonds, share options, or warrants. Their potential conversion dilutes ownership for existing shareholders, hence impacting diluted EPS.
4. Disclosure Requirements:

IAS 33 mandates comprehensive disclosure in the financial statements regarding EPS calculations, including basic and diluted amounts, assumptions used, and potential limitations of EPS as a performance measure.

BY BEST TEACHER OF FINANCIAL REPORTING IN PAKISTAN SIR HM RANA UMAR FAROOQ

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