IAS 33
Active
Earnings per Share
Prescribes the principles for determining and presenting basic and diluted earnings per share to improve comparability between entities and reporting periods.
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Conceptual Framework Linkage
Why a single per-share number needs its own standard
EPS is one of the most widely used performance metrics by investors – the Conceptual Framework's decision-usefulness objective demands this figure be calculated CONSISTENTLY across entities, since even small methodological differences would badly distort comparability, one of the Framework's central qualitative characteristics.
HOW IAS 33 MAPS TO THE FRAMEWORK
Comparability – a prescribed, uniform calculation methodology (not a policy choice) ensures EPS figures are meaningfully comparable across entities and over time Faithful representation – DILUTED EPS exists specifically to show the WORST CASE (most dilutive) scenario, preventing an overly optimistic picture of per-share earnings power Prudence – only instruments that would DECREASE EPS (dilutive) are included in diluted EPS; anti-dilutive instruments are excluded, ensuring diluted EPS is never accidentally overstated
IAS 33 is almost entirely a CALCULATION standard – like IAS 24, it does not change recognition or measurement of profit itself; it prescribes exactly HOW to divide reported profit by a share count to produce a comparable metric.
The core measurement logic
EPS measurement is fundamentally a fraction – the numerator (earnings) and denominator (shares) must each be defined with precision to prevent manipulation or inconsistency.
EPS typePurpose
Basic EPSActual, current per-share earnings attributable to ordinary shareholders
Diluted EPSThe MAXIMUM potential dilution from all convertible/option instruments – the worst-case, most conservative per-share figure
Qualitative characteristics in action: presenting BOTH basic and diluted EPS with EQUAL prominence reflects neutrality – users see both the current position and the potential downside from dilutive instruments, without either figure being emphasised over the other.
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Scope & Applicability
What IAS 33 covers
IAS 33 applies to entities whose ordinary shares or potential ordinary shares are PUBLICLY TRADED (or which are in the process of issuing such shares in public markets) – presenting basic and diluted EPS on the face of the statement of profit or loss.
MANDATORY PRESENTATION LOCATION
EPS is presented on the FACE of the statement of profit or loss, for profit/loss from CONTINUING operations attributable to ordinary equity holders, AND for profit/loss attributable to ordinary equity holders overall (i.e. including discontinued operations, if any) – with EQUAL prominence given to basic and diluted figures.
An entity that does NOT have publicly traded shares, but chooses to disclose EPS voluntarily, must still calculate it in accordance with IAS 33 if it makes that choice – there is no "partial compliance" option.
Key definitions you must know
Ordinary share
An equity instrument SUBORDINATE to all other classes of equity instruments.
Potential ordinary share
A financial instrument or other contract that may entitle its holder to ordinary shares (e.g. convertible bonds, convertible preference shares, share options, warrants).
Dilution
A REDUCTION in EPS, or an INCREASE in loss per share, resulting from the assumption that convertible instruments are converted, options/warrants are exercised, or ordinary shares are issued upon satisfaction of specified conditions.
Antidilution
An INCREASE in EPS, or a REDUCTION in loss per share, resulting from the assumption that convertible instruments are converted, options are exercised, or ordinary shares are issued upon satisfaction of specified conditions – such instruments are EXCLUDED from diluted EPS.
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Basic EPS – The Core Formula
The basic EPS formula
Basic EPS = Profit/loss attributable to ordinary equity holders of the parent ÷ Weighted average number of ordinary shares outstanding during the period
NUMERATOR ADJUSTMENTS
Profit/loss attributable to ordinary shareholders is calculated AFTER deducting: preference dividends (whether or not declared, if the preference shares are CUMULATIVE), and any other items relating to non-ordinary equity holders.
Worked example – basic EPS with preference dividends
Example 1: Deducting cumulative preference dividends
A company's profit for the year attributable to the parent is $3,200,000. It has 500,000 cumulative preference shares in issue with an annual dividend entitlement of $2 per share, none of which was declared this year due to cash constraints. Weighted average ordinary shares outstanding: 2,000,000.
Preference dividend deducted = 500,000 × $2 = $1,000,000 (deducted REGARDLESS of non-declaration, since the shares are cumulative)
Earnings attributable to ordinary shareholders = 3,200,000 − 1,000,000 = $2,200,000
Basic EPS = 2,200,000 ÷ 2,000,000 = $1.10 per share
Earnings attributable to ordinary shareholders = 3,200,000 − 1,000,000 = $2,200,000
Basic EPS = 2,200,000 ÷ 2,000,000 = $1.10 per share
If the preference shares were NON-cumulative instead, only the dividend ACTUALLY DECLARED for the period would be deducted – a frequently tested distinction.
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Weighted Average Shares – Bonus Issues & Rights Issues
Bonus (capitalisation) issues – retrospective adjustment
A bonus issue (shares issued to existing shareholders for NO consideration) is treated as if it had occurred at the BEGINNING of the EARLIEST period presented – since no new resources are raised, the weighted average share count for ALL periods presented is adjusted retrospectively by the bonus ratio, and PRIOR PERIOD EPS FIGURES ARE RESTATED accordingly.
Example 2: 1-for-4 bonus issue
A company had 4,000,000 shares in issue throughout 20X1, reporting EPS of $0.80. During 20X2, it makes a 1-for-4 bonus issue (1,000,000 new shares), giving 5,000,000 shares in issue for the rest of the year.
20X1 EPS restated = 0.80 ÷ 1.25 (the bonus factor, 5,000,000/4,000,000) = $0.64 – restated for comparability, even though 20X1's actual profit is unchanged.
Rights issues – the bonus element adjustment
A rights issue often includes a BONUS ELEMENT, since new shares are typically issued below full market price. The weighted average number of shares is adjusted using a THEORETICAL EX-RIGHTS PRICE (TERP) factor to reflect this embedded bonus.
TERP FORMULA
TERP = (Shares before rights × Fair value before rights + New shares issued × Rights issue price) ÷ Total shares after the rights issue
The adjustment factor (fair value per share before the rights issue ÷ TERP) is applied to shares outstanding BEFORE the rights issue, to reflect the bonus element embedded in the discounted price.
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Diluted EPS – Convertible Instruments
The "as if converted" method
For diluted EPS, the numerator is adjusted by adding back any interest/dividend expense recognised in the period related to potential ordinary shares (net of tax), and the denominator is adjusted by adding the number of ordinary shares that WOULD be issued on conversion – assuming conversion at the BEGINNING of the period (or date of issue, if later).
Example 3: Diluted EPS with a convertible bond
A company reports basic EPS on profit of $2,200,000 over 2,000,000 weighted average shares (basic EPS = $1.10). It also has a convertible bond outstanding all year, with after-tax interest expense of $180,000, convertible into 300,000 ordinary shares.
Adjusted earnings = 2,200,000 + 180,000 (interest saved, net of tax, if converted) = $2,380,000
Adjusted shares = 2,000,000 + 300,000 = 2,300,000
Diluted EPS = 2,380,000 ÷ 2,300,000 = $1.03 per share (LOWER than basic EPS of $1.10, confirming genuine dilution)
Adjusted shares = 2,000,000 + 300,000 = 2,300,000
Diluted EPS = 2,380,000 ÷ 2,300,000 = $1.03 per share (LOWER than basic EPS of $1.10, confirming genuine dilution)
Since $1.03 < $1.10, the convertible bond IS dilutive and must be included – see Section 7 for the anti-dilution test that would EXCLUDE an instrument if the reverse were true.
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Diluted EPS – Options, Warrants & the Treasury Stock Method
The treasury stock method – with worked example
Options and warrants are assumed exercised only if they would be DILUTIVE (i.e. the exercise price is BELOW the average market price of shares during the period – "in the money"). The assumed proceeds from exercise are treated as if used to REPURCHASE shares at the average market price – only the NET incremental shares (shares issued minus shares assumed repurchased) are added to the diluted EPS denominator.
Example 4: Share options diluted via the treasury stock method
A company has 100,000 share options outstanding all year, with an exercise price of $4.00. The average market price of the shares during the year was $5.00.
Assumed proceeds on exercise = 100,000 × $4.00 = $400,000
Shares assumed repurchased at average market price = 400,000 ÷ 5.00 = 80,000 shares
Net incremental shares added to the diluted EPS denominator = 100,000 − 80,000 = 20,000 shares (NOT the full 100,000)
Shares assumed repurchased at average market price = 400,000 ÷ 5.00 = 80,000 shares
Net incremental shares added to the diluted EPS denominator = 100,000 − 80,000 = 20,000 shares (NOT the full 100,000)
Only the NET incremental 20,000 shares are added – a very common calculation error is adding the FULL 100,000 options rather than applying the treasury stock method's net-share logic.
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Anti-Dilution – The Instrument-by-Instrument Test
Testing each potential ordinary share separately, most dilutive first
Potential ordinary shares are treated as DILUTIVE only when their conversion to ordinary shares would DECREASE EPS (or increase loss per share) from continuing operations. Instruments are ranked from MOST to least dilutive and included ONE AT A TIME, stopping as soon as adding the next instrument would INCREASE EPS (making it anti-dilutive) – antidilutive instruments are simply excluded from that period's diluted EPS.
An anti-dilutive instrument is NEVER included in diluted EPS, even if basic EPS shows a loss – the test is applied period by period, and different instruments may be dilutive in some periods and anti-dilutive in others, depending on earnings and share price movements.
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Restatement & Discontinued Operations
Retrospective restatement events
Bonus issues, share splits (retrospectively adjusted, no restatement of prior PROFIT figures needed – only the share count) Prior period error corrections and changes in accounting policy under IAS 8 – EPS is restated for these consistently with the restatement of the underlying financial statements
Discontinued operations – separate presentation
If an entity presents a discontinued operation (IFRS 5), basic and diluted amounts per share for the DISCONTINUED operation are presented either on the face of the SOPL or in the notes – in ADDITION to the continuing-operations and total EPS figures required on the face of the statement.
This gives users THREE distinct EPS pairs to work with: continuing operations, discontinued operations, and total – a frequently tested presentation nuance.
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Disclosure Requirements
Required disclosures
RECONCILIATION DISCLOSURES
The amounts used as the numerators in calculating basic and diluted EPS, and a reconciliation of those amounts to profit/loss attributable to the parent The weighted average number of ordinary shares used as the denominator, and a reconciliation of these denominators to each other
OTHER DISCLOSURES
Instruments that could potentially dilute basic EPS in the future but were EXCLUDED from the diluted EPS calculation because they were anti-dilutive in the current period A description of ordinary share transactions or potential ordinary share transactions, OTHER than those already reflected in the reported figures, occurring AFTER the reporting period that would have changed the number of shares significantly had they occurred before year end
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Critical Judgments & Estimates
Where management judgement matters most
SIGNIFICANT JUDGEMENTS
Whether a specific instrument's terms make it genuinely dilutive or anti-dilutive in a given period Determining the correct order in which multiple potential ordinary share instruments should be tested (most dilutive first) Assessing whether contingently issuable shares' conditions have genuinely been satisfied at the reporting date
SIGNIFICANT ESTIMATES
Average market price of ordinary shares during the period, used in the treasury stock method for options/warrants The theoretical ex-rights price (TERP) calculation for a rights issue's bonus element
EPS is one of the most closely watched metrics by markets and analysts – even seemingly minor errors in the weighted average share calculation (e.g. forgetting to retrospectively adjust for a bonus issue) can materially mislead year-on-year trend analysis.
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IFRS vs US GAAP – Key Differences
Comparison – IAS 33 vs US GAAP (ASC 260)
FeatureIFRS (IAS 33)US GAAP
Core methodology (basic/diluted, treasury stock method)As described aboveVery closely converged – the two standards were substantially harmonised through a joint IASB/FASB project
Contingently convertible instrumentsIncluded in diluted EPS if dilutive under the general rules, regardless of whether the contingency has been metHistorically had specific "contingent conversion" guidance requiring inclusion of certain instruments regardless of whether the market price trigger was met – a notable prior divergence, though convergence has narrowed differences over time
Presentation locationOn the face of the SOPL, with equal prominence for basic/dilutedAlso on the face of the income statement, broadly converged
Two-class method (participating securities)Less explicitly codified as a distinct named method, though similar substance-based principles apply through the general EPS frameworkExplicitly codified "two-class method" required for participating securities that share in dividends with ordinary shares
IAS 33 and ASC 260 are among the MOST converged pairs of standards in the entire IFRS/US GAAP comparison, following a dedicated joint standard-setting project – remaining differences are narrow and largely technical rather than conceptual.
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Statement Mapping – Where Every EPS Component Lands
Comprehensive event-to-statement mapping table
Event / transactionStatement(s) affectedNotes
Basic EPS (continuing operations, total)SOPL – faceMandatory presentation with equal prominence to diluted EPS
Diluted EPS (continuing operations, total)SOPL – faceNever higher than basic EPS (or less negative, for a loss)
Discontinued operations EPSSOPL – face or NotesPresented separately alongside continuing/total EPS
Bonus issue / share splitEquityRetrospective adjustment to weighted average shares for ALL periods presented; prior EPS restated
Rights issue with bonus elementEquityTERP factor applied to shares before the rights issue
Convertible bond interest add-back (diluted EPS)SOPL (memorandum calc.)Net-of-tax interest added back to the numerator for diluted EPS purposes only
Options/warrants (treasury stock method)SOPL (memorandum calc.)Only net incremental shares added to the diluted denominator
Anti-dilutive instruments–Excluded from diluted EPS entirely; disclosed as a note
Numerator/denominator reconciliationsNotesMandatory disclosure
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Related Standards – Cross-Reference Map
How IAS 33 connects across the IFRS body of literature
StandardNature of the connection
IAS 1Mandates the presentation LOCATION for basic/diluted EPS on the face of the statement of profit or loss
IAS 32Determines whether a compound instrument's convertible feature (equity component) is relevant potential ordinary shares for diluted EPS purposes
IFRS 5Requires separate presentation of discontinued operations' EPS alongside continuing and total EPS
IFRS 2Employee share options accounted for under IFRS 2 are treated as potential ordinary shares, tested via the treasury stock method for dilution
IAS 8Governs restatement of prior period EPS figures for retrospective policy changes and error corrections
IAS 10Post-year-end share transactions (before authorisation for issue) affecting the ordinary share count require disclosure, even if not reflected in the reported weighted average calculation
IFRS 3Contingently issuable shares from a business combination's consideration arrangements are treated as potential ordinary shares once contingency conditions are met
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Quick-Reference Glossary
Weighted average number of ordinary shares
The number of shares outstanding at the START of the period, adjusted by shares bought back or issued during the period, weighted by the time they were outstanding.
Treasury stock method
The method used to calculate the dilutive effect of options and warrants – assumed proceeds from exercise are treated as used to repurchase shares at the average market price, adding only the NET incremental shares to the diluted EPS denominator.
Theoretical ex-rights price (TERP)
The theoretical share price immediately after a rights issue, calculated as a weighted average of the pre-rights price and the discounted rights issue price, used to identify the bonus element embedded in a rights issue.
Contingently issuable shares
Ordinary shares issuable for little or no cash/other consideration upon satisfaction of specified conditions – included in diluted EPS if the conditions would be met if the period ended today.
Cumulative preference shares
Preference shares whose dividend entitlement, if unpaid, accumulates and must be deducted from earnings for EPS purposes REGARDLESS of whether it was actually declared.
Bonus element
The implicit value given to existing shareholders in a bonus issue or a rights issue priced below fair value, requiring a retrospective adjustment to the weighted average share count.
Financial statement key
BS Balance sheet
IS Income statement
SE Statement of changes in equity
OCI Other comprehensive income
SCF Statement of cash flows
History & Development
Jan-1996
Exposure Draft E33 Earnings Per Share
Feb-1997
IAS 33 Earnings Per Share
Effective for annual periods beginning on or after 1 January 1999
18-Dec-2003
Revised version of IAS 33 issued by the IASB
Effective for annual periods beginning on or after 1 January 2005
07-Aug-2008
IASB proposes to amend IAS 33. Click for Press Release (PDF 48k).
06-Sep-2007
Amended by IAS 1 Presentation of Financial Statements (2007)
Effective for annual periods beginning on or after 1 January 2009
12-May-2011
Amended by IFRS 10 Consolidated Financial Statements and IFRS 11 Joint Arrangements
Effective for annual periods beginning on or after 1 January 2013
12-May-2011
Amended by IFRS 13 Fair Value Measurements
Effective for annual periods beginning on or after 1 January 2013
16-Jun-2011
Amended by IAS 1 Presentation of Items of Other Comprehensive Income
Effective for annual periods beginning on or after 1 July 2012
24-Jul-2014
Amended by IFRS 9 Financial Instruments
Effective for annual periods beginning on or after 1 January 2018
09-Apr-2024
Amended by IFRS 18 Presentation and Disclosure in Financial Statements
The amendments to IAS 33 permit an entity to disclose additional earnings per share in the notes only if the numerator is either a total or subtotal identified in IFRS 18 or is a management performance measure. The amendments need to be applied when IFRS 18 is applied, which is effective for annual periods beginning on or after 1 January 2027