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MTPs QUESTIONS

Q6. (APRIL 19 – 8 Marks)

Calculate Subsidiary’s and Group’s Basic EPS and Diluted EPS, when
Parent:
Profit attributable to ordinary equity holders of the Rs. 12,000 (excluding any earnings of, or

parent entity dividends paid by, the subsidiary)
Ordinary shares outstanding 10,000
Instruments of subsidiary owned by the parent 800 ordinary shares

30 warrants exercisable to purchase
ordinary shares of subsidiary
300 convertible preference shares

Subsidiary:
Profit Rs. 5,400
Ordinary shares outstanding 1,000

Warrants 150, exercisable to purchase ordinary
shares of the subsidiary
Exercise price Rs. 10

Average market price of one ordinary share Rs. 20
Convertible preference shares 400, each convertible into one ordinary
share

Dividends on preference shares Re 1 per share
No intercompany eliminations or adjustments were necessary except for dividends.
Ignore income taxes. Also, ignore classification of the components of convertible financial instruments

as liabilities and equity or the classification of related interest and dividends as expenses and equity
as required by Ind AS 32.

SOLUTION

Subsidiary’s earnings per share
Basic EPS = Rs.5.00 calculated as under:
[Rs. 5,400 (a) – Rs.400 (b)] / 1,000 (c)

Diluted EPS = Rs.3.66 calculated as under:
Rs. 5,400 (d) / [(1,000 + 75 (e) + 400(f))]
Notes:

(a) Subsidiary's profit attributable to ordinary equity holders.

(b) Dividends paid by subsidiary on convertible preference shares.
(c) Subsidiary's ordinary shares outstanding.

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