Page 13 - 21. COMPILER QB - INDAS 33

SOLUTION

The EPS computations for Year 1 as per Ind AS 33 are as follows.

Basic EPS Diluted EPS
1. Determine the numerator 1. Identify Potential Ordinary Shares (POSs)
No adjustment is necessary until the The convertible bonds are the only POSs.
convertible bonds are converted and
ordinary shares are issued. The
numerator is net profit ie.
Rs. 46,00,000.
2. Determine the denominator 2. For each POS, calculate Earnings per Incremental Share (EPIS)
There is no change in the number of Since Zio Life Limited has the choice of settlement, for the purpose of
outstanding shares during the year. The determining the EPIS, it assumes the share-settlement assumption.
denominator is therefore 30,00,000. Potential adjustment to the numerator for EPIS:
The convertible bonds, when settled in ordinary shares, would increase
profit or loss for the year by the post-tax amount of the interest
expense:
(Interest expense on the convertible bonds) x (1 - income tax rate) =
(Rs. 1,800) x (1 - 40%) = Rs. 1,080
Potential adjustment to the denominator for EPIS:
The convertible bonds, when settled in ordinary shares, would increase
the number of outstanding shares by 2,00,000 (20,00,000 / 10).
EPIS is calculated as follows:
EPIS = 1,080 / 2,00,000 = 0.01
3. Determine basic EPS 3. Rank the POSs
Basic EPS = 46,00,000 / 30,00,000 This step does not apply, because the
= 1.53 convertible bonds are the only class of POSs.
4. Identify dilutive POSs and determine diluted EPS
The potential impact of convertible bonds is determined as follows. (Refer
W.N. below)
Accordingly, Zio Life Limited includes the impact of the convertible bonds in
diluted EPS.
Diluted EPS = Rs. 1.44

Working Note:
Calculation of Diluted EPS

Earnings (Rs.) Weighted average Per Share (Rs.) Dilutive?
number of shares
Basic EPS 46,00,000 30,00,000 1.53
Convertible bonds 1,080 2,00,000
Total 46,01,080 32,00,000 1.44 Yes

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