IAS 33 Earnings Per Share

International Accounting Standard 33

Issued: in 1997; re-issued in 2003, followed by amendments
Effective date: 1 January 2005
What it does:
- It establishes rules for calculation of both:
  1. Basic earnings per share; and
  2. Diluted earnings per share.
- Basic EPS is calculated by dividing profit or attributable to equity holders of the parent entity (the numerator) by the weighted average number of ordinary shares outstanding (the denominator) during the period.
- IAS 33 sets the rules for calculation of earnings and weighted average number of shares, both in a greater detail.
- Diluted EPS are calculated similarly as basic EPS, but an entity is required to adjust profit or loss attributable to ordinary equity holders of the parent entity and the weighted average number of shares outstanding for the effect of all dilutive potential ordinary shares.
- Rules for calculation of earnings and weighted average number of shares are set in a detail, with specific guidance on options, warrants and their equivalents, convertible instruments, contingently issuable shares, contracts that may be settled in ordinary shares or cash, purchased options and written put options.
- IAS 33 sets rules on retrospective adjustments when the number of shares changes as a result of a capitalization, bonus issue, share split, etc.
- In the appendix, the standard provides application guidance. IASB issued also illustrative examples that are not part of IAS 33.

Preference shares, tax and EPS - What adjustment shall we make when calculating earnings per share? Is it after tax or before tax?

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