HKAS 33 - Earnings per Share (Condensed)
| Section | Key Concept | Brief Description |
|---|---|---|
| Objective & Scope | Denominator focus; public entities | Prescribes EPS determination for entities with publicly traded shares or filing for public issue. |
| Definitions | Ordinary shares, potential ordinary shares, dilution | Defines key terms: ordinary shares are subordinate equity; potential ordinary shares include convertibles, options, warrants; dilution reduces EPS. |
| Basic EPS | Profit รท weighted average shares | Numerator: profit after preference dividends. Denominator: time-weighted outstanding shares, adjusted for bonus issues, splits. |
| Diluted EPS | Adjusted profit รท adjusted shares | Includes dilutive potential shares; uses 'if-converted' method; treasury stock method for options/warrants. |
| Retrospective Adjustments | Adjust for capital changes without resource change | Bonus issues, share splits, errors require retrospective restatement of all periods presented. |
| Presentation | Equal prominence on face of statement | Basic and diluted EPS for profit from continuing operations and total profit, for each class of ordinary shares. |
| Disclosure | Reconciliations, antidilutive instruments, subsequent events | Must disclose numerator/denominator reconciliations, antidilutive instruments, and post-reporting period transactions. |
Objective & Scope (paras 1-4A)
Objective
Prescribe principles for determining and presenting EPS to improve performance comparisons between entities and periods. Focus is on the denominator of the EPS calculation.
Scope โ Who Must Apply?
| Entity Type | Requirement |
|---|---|
| Publicly traded (shares or potential shares) | Must apply in separate or consolidated financial statements |
| Filing with securities commission for public issue | Must apply |
| Voluntary disclosure | Must comply fully with HKAS 33 |
Definitions (paras 5-8)
Key Terms
| Term | Definition |
|---|---|
| Ordinary share | Equity instrument subordinate to all other classes |
| Potential ordinary share | Financial instrument that may entitle holder to ordinary shares |
| Dilution | Reduction in EPS or increase in loss per share from conversion/exercise |
| Antidilution | Increase in EPS or reduction in loss per share |
| Contingently issuable ordinary shares | Shares issuable for little/no cash upon satisfaction of specified conditions |
Examples of Potential Ordinary Shares
- Convertible financial liabilities or equity instruments (including preference shares)
- Options and warrants
- Shares issuable under contractual arrangements (e.g., business purchase)
Basic EPS โ Numerator (paras 9-18)
Formula
Basic EPS = Profit or loss attributable to ordinary equity holders of parent รท Weighted average number of ordinary shares outstanding
Numerator Adjustments
Profit or loss is adjusted for after-tax amounts of:
- Preference dividends
- Differences on settlement of preference shares
- Other effects of preference shares classified as equity
Other Adjustments
| Event | Treatment |
|---|---|
| Increasing rate preference shares | Amortise discount/premium using effective interest method; treat as preference dividend |
| Repurchase of preference shares | Excess of consideration over carrying amount is deducted |
| Induced conversion of convertible preference shares | Excess of fair value of shares issued over original terms is deducted |
| Settlement of preference shares | Excess of carrying amount over consideration is added |
Basic EPS โ Denominator (paras 19-29)
Weighted Average Number of Shares
Time-weight shares outstanding during the period. Shares issued or bought back are weighted from the date consideration is receivable or paid.
Timing of Inclusion
| Issue Type | Date Included |
|---|---|
| Cash issue | When cash is receivable |
| Dividend reinvestment | When dividends are reinvested |
| Conversion of debt | From date interest ceases |
| Settlement of liability | From settlement date |
| Acquisition of non-cash asset | From date acquisition recognised |
| Business combination | From acquisition date |
| Contingently issuable shares | Only when all conditions satisfied |
Adjustments for Capital Changes Without Resource Change
For bonus issues, share splits, and rights issues, adjust prior period shares as if the event occurred at the beginning of the earliest period presented.
Diluted EPS โ General (paras 30-44)
Formula
Diluted EPS = Adjusted profit รท (Basic weighted average shares + Incremental dilutive shares)
Numerator Adjustments
Add back after-tax amounts of:
- Dividends on dilutive potential ordinary shares
- Interest on dilutive potential ordinary shares
- Any other changes that would result from conversion
Denominator Adjustments
Add weighted average number of shares that would be issued on conversion of all dilutive potential ordinary shares, assumed converted at the beginning of the period (or date of issue, if later).
Order of Inclusion
Consider each issue separately, from most dilutive to least dilutive. Options and warrants are generally included first because they do not affect the numerator.
Diluted EPS โ Specific Instruments (paras 45-63)
Options, Warrants, and Equivalents
Treasury Stock Method: Assume exercise of dilutive options. Use proceeds to buy back shares at average market price. The excess shares issued for no consideration are added to denominator.
Convertible Instruments
Use 'if-converted' method. Antidilutive when the per-share adjustment (dividend or interest net of tax) exceeds basic EPS.
Contingently Issuable Shares
Include in diluted EPS if conditions are met at period-end. For earnings conditions, use current earnings; for market price conditions, use current market price.
Contracts Settled in Shares or Cash
- Issuer's option: Presume share settlement.
- Holder's option: Use more dilutive of cash or share settlement.
Written Put Options
When 'in the money' (exercise price > market price), assume shares issued at market price to raise proceeds to buy back shares. Add incremental shares to denominator.
Retrospective Adjustments & Presentation (paras 64-69)
Retrospective Adjustments
Adjust basic and diluted EPS for all periods presented when:
- Number of shares changes due to bonus issue, share split, or reverse split
- Errors or changes in accounting policy accounted for retrospectively
Do not restate for changes in assumptions or conversion of potential shares.
Presentation Requirements
- Present basic and diluted EPS on the face of the statement of comprehensive income
- For profit from continuing operations and total profit
- For each class of ordinary shares with different rights
- With equal prominence for all periods
- Even if negative (loss per share)
Disclosure (paras 70-73A)
Required Disclosures
| Item | Detail |
|---|---|
| Numerators | Amounts used in basic and diluted EPS, with reconciliation to profit or loss attributable to parent |
| Denominators | Weighted average number of shares for basic and diluted EPS, with reconciliation |
| Antidilutive instruments | Instruments that could dilute in future but are antidilutive in current period |
| Subsequent events | Description of transactions after period-end that would have significantly changed shares outstanding |
Additional Per Share Amounts
If disclosing amounts other than those required by HKAS 33:
- Use weighted average number of shares determined per this Standard
- Present basic and diluted with equal prominence in notes
- Indicate basis of numerator (e.g., before or after tax)
- Provide reconciliation if component is not a line item
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