Page 10 - 21. COMPILER QB - INDAS 33

Q7. (OCT 19 – 5 Marks)

Mittal Motors Limited is preparing financials for the year ended March 31, 20X2. The Company had some

queries in preparation of certain data that is required to be presented in the financials. As the retainer of the
Company, please advise the company for the following issues:

(i) Mittal Motors has issued 10,00,000 numbers of 9% cumulative preference shares. The Company has arrears
of Rs. 15 crores of preference dividend as on March 31, 20X2, it includes current year arrears of Rs. 1.75

crores. The Company did not declare any dividend for equity shareholders as well as for preference
shareholders. What is the amount of dividend to be reduced from profit or loss for the year for calculating

basic Earnings Per Share?
(ii) Further Mittal Motors has also issued certain convertible debentures, which are outstanding as at the year

end. For the purpose of computation of weighted average number of shares (to arrive at diluted EPS) when

should the dilutive potential shares be deemed to have been converted into shares?
A. At the start of the period.
B. The date of issue of the potential shares

C. At the start of the period or, if later, the date of the issue of the potential shares

D. At the end of the period.

SOLUTION

(i) As per Ind AS 33 “Earnings per share”, “The after-tax amount of preference dividends that is deducted
from profit or loss is the after-tax amount of the preference dividends for cumulative preference shares

required for the period, whether or not the dividends have been declared. 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”.
In the given case, the amount of preference dividends Rs.1.75 crores declared for the year ended March 31,

20X2 (i.e., the current period) is to be deducted from profit or loss for calculating EPS.

(ii) As per para 36 of Ind AS 33 “Earnings per share’, “For the purpose of calculating diluted earnings per
share, the number of ordinary shares shall be the weighted average number of ordinary shares plus the

weighted average number of ordinary shares that would be issued on the conversion of all the dilutive potential

ordinary shares into ordinary shares. Dilutive potential ordinary shares shall be deemed to have been converted
into ordinary shares at the beginning of the period or, if later, the date of the issue of the potential ordinary
shares”.

Q8. (MAY 20 – 4 Marks)

Explain why weighted average number of shares is used in the calculation of earnings per share and how it is
calculated.

Following is the data for company XYZ in respect of the number of equity shares during the financial year
21. 9