ASBE No. 34
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Earnings Per Share
Earnings Per Share is part of the Chinese Accounting Standards for Business Enterprises (ASBE).
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Conceptual Framework Linkage
A standardised profitability measure per ordinary share
ASBE No. 34 governs the CALCULATION and PRESENTATION of EARNINGS PER SHARE (EPS) – a WIDELY-used, STANDARDISED measure of an ENTERPRISE'S profitability ON A PER-SHARE basis, ENABLING comparability BETWEEN companies and OVER time. THE Standard is CLOSELY converged with IAS 33 internationally.
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Scope
Companies with publicly traded ordinary shares
This Standard applies to ENTERPRISES whose ORDINARY shares (or POTENTIAL ordinary SHARES) are PUBLICLY traded, REQUIRING the PRESENTATION of BOTH basic and DILUTED earnings PER share ON the FACE of the INCOME Statement.
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Basic Earnings Per Share
Profit attributable to ordinary shareholders, divided by weighted average shares
BASIC EPS = PROFIT attributable to ORDINARY shareholders OF the parent (AFTER deducting PREFERENCE dividends) ÷ WEIGHTED average NUMBER of ORDINARY shares OUTSTANDING during the PERIOD.
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Weighted Average Shares Outstanding
Time-weighted for shares issued or repurchased during the period
SHARES ISSUED or REPURCHASED DURING the period are WEIGHTED by the PROPORTION of the period THEY were OUTSTANDING – ENSURING the DENOMINATOR REFLECTS the ACTUAL capital AVAILABLE to GENERATE the reported PROFIT OVER time.
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Diluted Earnings Per Share
Adjusting for the potential dilutive effect of convertible instruments
DILUTED EPS ADJUSTS the BASIC EPS calculation for the POTENTIAL dilutive EFFECT of CONVERTIBLE bonds, SHARE options, WARRANTS, and OTHER potential ORDINARY shares – SHOWING the LOWEST possible EPS figure that COULD result IF all DILUTIVE potential SHARES were CONVERTED or EXERCISED.
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The If-Converted and Treasury Stock Methods
Adjusting both numerator and denominator
FOR CONVERTIBLE instruments (e.g. CONVERTIBLE bonds), the "IF-CONVERTED" method ADDS BACK the AFTER-tax interest SAVED (had CONVERSION occurred) to the NUMERATOR, and ADDS the RESULTING additional SHARES to the DENOMINATOR. FOR OPTIONS and WARRANTS, the "TREASURY STOCK" method ASSUMES proceeds FROM exercise are USED to REPURCHASE shares at the AVERAGE market PRICE, with ONLY the NET incremental shares ADDED to the DENOMINATOR.
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Anti-Dilutive Instruments – Excluded From the Calculation
Only dilutive instruments are included
POTENTIAL ordinary SHARES are INCLUDED in the DILUTED EPS calculation ONLY if THEIR effect would be DILUTIVE (DECREASING EPS or INCREASING loss per SHARE) – INSTRUMENTS whose CONVERSION would be ANTI-dilutive (INCREASING EPS) are EXCLUDED entirely FROM the diluted EPS CALCULATION.
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Worked Example – Calculating Basic EPS
Profit divided by weighted average shares
Example: A straightforward basic EPS calculation
A company reports profit attributable to ordinary shareholders of RMB 120,000,000, with a weighted average of 60,000,000 ordinary shares outstanding during the year.
Basic EPS = RMB 120,000,000 ÷ 60,000,000 = RMB 2.00 per share.
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Worked Example – Calculating Diluted EPS With Convertible Bonds
Applying the if-converted method
Example: Convertible bonds outstanding
Continuing the prior example, the company also has convertible bonds outstanding that would, if converted, add 8,000,000 shares. After-tax interest saved on conversion would be RMB 6,000,000.
Diluted EPS = (RMB 120,000,000 + RMB 6,000,000) ÷ (60,000,000 + 8,000,000) = RMB 126,000,000 ÷ 68,000,000 = RMB 1.85 per share – LOWER than basic EPS, CONFIRMING the CONVERSION is genuinely DILUTIVE.
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Disclosure Requirements
What ASBE No. 34 requires
Basic and diluted EPS, presented on the face of the Income StatementReconciliation of the numerator and denominator used in basic and diluted EPS calculationsInstruments that could potentially dilute EPS in the future but were excluded as anti-dilutive
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Critical Judgments & Estimates
Where judgement matters most
SIGNIFICANT JUDGEMENTS
Whether a potential ordinary share is genuinely dilutive or anti-dilutive
SIGNIFICANT ESTIMATES
Average market price of shares, underlying the treasury stock method
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Relationship to IAS 33
Comparison – ASBE 34 vs IAS 33
FeatureASBE 34IAS 33
Basic/diluted EPS structureSame methodologySame methodology – converged
If-converted/treasury stock methodsSame approachSame approach – converged
A GENUINELY thoroughly CONVERGED standard, WITH no meaningful SUBSTANTIVE divergence to REPORT.
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Statement Mapping
Where every EPS event lands
EventStatement(s) affectedNotes
Basic and diluted EPSISPresented on the face of the Income Statement
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Related Standards
Cross-reference map
StandardConnection
ASBE No. 11Share-based Payment – relevant for identifying potential ordinary shares arising from employee equity awards
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Quick-Reference Glossary
Diluted EPS
An EPS measure adjusting for the potential dilutive effect of convertible instruments, options, and warrants, representing the lowest possible EPS figure.
Anti-dilutive instrument
A potential ordinary share whose conversion or exercise would increase EPS (or decrease loss per share), excluded from the diluted EPS calculation.
Financial statement key (Chinese GAAP / ASBE terminology)
BS Balance Sheet (资产负债表)
IS Income Statement (利润表)
SCOE Statement of Changes in Owners' Equity (所有者权益变动表)
CFS Cash Flow Statement (现金流量表)
History & Development
2006-02
ASBE No. 34 Earnings Per Share issued
Operative for periods beginning on or after 1 February 2007