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Accounting Standard (AS) 20

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Accounting Standard (AS) 20
Earnings Per Share
Objective
The objective of this Standard is to prescribe principles for the determination and presentation of
earnings per share which will improve comparison of performance among different enterprises for
the same period and among different accounting periods for the same enterprise. The focus of this
Standard is on the denominator of the earnings per share calculation. Even though earnings per share
data has limitations because of different accounting policies used for determining ‘earnings’, a
consistently determined denominator enhances the quality of financial reporting.
Scope
1. This Standard should be applied by all the entities. However, a Small and Medium Sized
Company and a Small and Medium Sized non-corporate entity falling in Level II or Level III,
as defined in Appendix 1 to this Compendium, ‘Applicability of Accounting Standards to
Various Entities, may not disclose diluted earning per share (both including and excluding
extraordinary items).
Measurement
Basic Earnings Per Share
Basic earnings per share should be calculated by dividing the net profit or loss for the period
attributable to equity shareholders by the weighted average number of equity shares outstanding
during the period.
Earnings - Basic
For the purpose of calculating basic earnings per share, the net profit or loss for the period
attributable to equity shareholders should be the net profit or loss for the period after deducting
preference dividends and any attributable tax thereto for the period.
All items of income and expense which are recognised in a period, including tax expense and
extraordinary items, are included in the determination of the net profit or loss for the period unless
an Accounting Standard requires or permits otherwise (see Accounting Standard (AS) 5, Net Profit or
Loss for the Period, Prior Period Items and Changes in Accounting Policies). The amount of preference
dividends and any attributable tax thereto for the period is deducted from the net profit for the period

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(or added to the net loss for the period) in order to calculate the net profit or loss for the period
attributable to equity shareholders.
The amount of preference dividends for the period that is deducted from the net profit for the period
is:
(a) the amount of any preference dividends on non-cumulative preference shares provided for in
respect of the period; and
(b) the full amount of the required preference dividends for cumulative preference shares for the
period, whether or not the dividends have been provided for. The amount of preference dividends for
the period does not include the amount of any preference dividends for cumulative preference shares
paid or declared during the current period in respect of previous periods.
If an enterprise has more than one class of equity shares, net profit or loss for the period is
apportioned over the different classes of shares in accordance with their dividend rights.
Equity shares may be issued, or the number of shares outstanding may be reduced, without a
corresponding change in resources. Examples include:
(a) a bonus issue;
(b) a bonus element in any other issue, for example a bonus element
in a rights issue to existing shareholders;
(c) a share split; and
(d) a reverse share split (consolidation of shares).
Fair value per share immediately prior to the exercise of rights
Theoretical ex-rights fair value per share
Diluted Earnings Per Share
For the purpose of calculating diluted earnings per share, the net profit or loss for the period
attributable to equity shareholders and the weighted average number of shares outstanding during
the period should be adjusted for the effects of all dilutive potential equity shares.
In calculating diluted earnings per share, effect is given to all dilutive potential equity shares that were
outstanding during the period, that is:
(a) the net profit for the period attributable to equity shares is:

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Accounting Standard (AS) 20 Earnings Per Share Objective The objective of this Standard is to prescribe principles for the determination and presentation of earnings per share which will improve comparison of performance among different enterprises for the same period and among different accounting periods for the same enterprise. The focus of this Standard is on the denominator of the earnings per share calculation. Even though earnings per share data has limitations because of different accounting policies used for determining ‘earnings’, a consistently determined denominator enhances the quality of financial reporting. Scope 1. This Standard should be applied by all the entities. However, a Small and Medium Sized Company and a Small and Medium Sized non-corporate entity falling in Level II or Level III, as defined in Appendix 1 to this Compendium, ‘Applicability of Accounting Standards to Various Entities’, may not disclose diluted earning per share (both including and excluding extraordinary items). Measurement Basic Earnings Per Share Basic earnings per share should be calculated by dividing the net profit or loss for the period attributable to equity shareholders ...
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