Earnings Per Share (AS-20)

This query is : Resolved

GANESH DURAI IYER (Querist)
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23 September 2008 The following informaion is given:

Income from continuing operations before extra-ordinary items and tax: Rs. 13 Lacs

Tax Rate @ 30%

Extraordinary loss ( Net of tax) Rs. 3 Lacs

My query is whether Rs.3 Lacs extraordinary loss has to be deducted from Rs.13 Lacs and tax has to be calculated on the remaining Rs. 10 Lacs? Kindly advice.

S.Srinivasaraghavan

S.Srinivasaraghavan (Expert)
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23 September 2008 PLease refer to para 48 and 51 of AS 20

CMA Gul S

CMA Gul S (Expert)
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23 September 2008 Para 48 says

Paragraph 48 of AS 20 has been decided to be modified as under (modifications made are shown as underlined):
“48. In addition to disclosures as required by paragraphs 8, 9 and 44 of this Statement, an enterprise should
disclose the following:
(i) where the statement of profit and loss includes extraordinary items (within the meaning of AS 5,
Net Profit or Loss for the Period, Prior Period Items and Changes in Accounting Policies), the enterprise
should disclose basic and diluted earnings per share computed on the basis of earnings excluding extraordinary
items (net of tax expense); and
(ii) (a) the amounts used as the numerators in calculating basic and diluted earnings per share, and a reconciliation
of those amounts to the net profit or loss for the period;
(b) the weighted average number of equity shares used as the denominator in calculating basic and
diluted earnings per share, and a reconciliation of these denominators to each other; and
(c) the nominal value of shares along with the earnings per share figures.”
As a consequence to the above, it has been decided to make the following modification in paragraph 51 of AS 20 (modifications
made are shown in strike-through form):
“51. An enterprise may wish to disclose more information than this Statement requires. Such information
may help the users to evaluate the performance of the enterprise and may take the form of per share amounts
for various components of net profit., e.g., profit from ordinary activities. Such disclosures are encouraged.
However, when such amounts are disclosed, the denominators need to be calculated in accordance with this
Statement in order to ensure the comparability of the per share amounts disclosed.”
The limited revisions come into effect in respect of accounting periods commencing on or after 1-4-2004. General
Clarification (GC) – 10/2002, Disclosure of Earnings Per Share figures in case of Extraordinary Items, issued by the
Accounting Standards Board, in October 2002, stands withdrawn from that date.
Pursuant to the above limited revisions, the applicability paragraphs of AS 20, as modified to address the matter relating to
Small and Medium Sized Enterprises (see November 2003 issue of the Institute’s Journal, Pp. 486 and 487), stand modified,
in respect of accounting periods commencing on or after 1-4-2004, as under (modifications made are shown as underlined):
“Accounting Standard (AS) 20, ‘Earnings Per Share’, issued by the Council of the Institute of Chartered
Accountants of India, comes into effect in respect of accounting periods commencing on or after 1-4-2001
and is mandatory in nature, from that date, in respect of enterprises whose equity shares or potential equity
shares are listed on a recognised stock exchange in India.
An enterprise which has neither equity shares nor potential equity shares which are so listed but which discloses
earnings per share, should calculate and disclose earnings per share in accordance with this Standard from the
aforesaid date. However, in respect of accounting periods commencing on or after 1-4-20041, if any such enterprise
does not fall in any of the following categories, it need not disclose diluted earnings per share (both including
and excluding extraordinary items) and information required by paragraph 48 (ii) of this Standard:
(i) Enterprises whose equity securities or potential equity securities are listed outside India and enterprises
whose debt securities (other than potential equity securities) are listed whether in India or outside
India.

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