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AS 20 EPS Calculation

Srinath (Chartered Accountant) (166 Points)

07 April 2011

Please Help me with a few Problems

Thnx in advnce!

1. Equity Shares on 1.1.2001 : 5 lac

Avg. fair value/share during 2001: 20

ESOP options given on 1.1.2001 : 1 lac shares @ 15/share

Net Profit 12 lac (No tax)

Find Diluted EPS ?

Answer Given : 1200000/525000 ?? Is this correct?

2. Calculate Basic EPS

Profit 50 lakh ( No tax)

10% Preference Shares 100 lakh

Shares at beginning 10 lakh

Bonus issued at "middle" of year : 5 lakh

Given Answer : 2.6666 how?? Correct?

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Max Payne (employed) (2569 Points)
Replied 07 April 2011

Originally posted by : Srinath
	Please Help me with a few Problems Thnx in advnce! 1. Equity Shares on 1.1.2001 : 5 lac Avg. fair value/share during 2001: 20 ESOP options given on 1.1.2001 : 1 lac shares @ 15/share Net Profit 12 lac (No tax) Find Diluted EPS ? Answer Given : 1200000/525000 ?? Is this correct? 2. Calculate Basic EPS Profit 50 lakh ( No tax) 10% Preference Shares 100 lakh Shares at beginning 10 lakh Bonus issued at "middle" of year : 5 lakh Given Answer : 2.6666 how?? Correct?

EP of option = 15

MP of share = 20

No of shares acquirable with the options = 100,000 (1)

First find the bonus element in the option.

EP of 100,000 options = 15*100,000 = 15,00,000

No of shares available at this price from market = 15,00,000/20 = 75,000 (2)

Therefore bonus element in the options = (1) - (2) = 100,000 - 75,000 = 25,000 shares

Existing no of equity shares = 500,000

Add: dilutive potential equity = 25,000

Total = 525,000 shares

Dilutive effect of options on the earnings = Nil

Therefore, Diluted EPS is correct @ 12,00,000/5,25,000

Whether bonus issued at the end or beginning or middle of the year, the period shall be reckoned from beginning of the year itself, because bonus is only capilisation of the existing ascertained profits of previous year(s)..

Hence Total no of shares = 15,00,000

PAT = 50,00,000

(-) Preference Dvd 10,00,000

Earngs to eqty shrhldrs 40,00,000

No of equity shares 15,00,000

EPS (Basic) 2.67

If previous years Profits/EPS given you have to restate that years EPS taking 15,00,000 shares as the base for that year also. Same to be done for shares split or consolidation of shares also. (AS 20 rqmt)

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