Basic & Diluted EPS

[Bijay Shrestha]

Please advise -

In the beginning of the FY 2015-16 as on 1-4-2015, O/s no. of shares is 100,000 of Face value of ₹ 10.

20000 Fully 10 % convertible debentures of ₹ 10 each conversion ratio being 2 shares for each debenture.

In June-2015, 5000 debentures were converted into 10000 shares. At the end of the year 2015-16, 15000 debentures pending for conversion.

For the year FY 2015-16 Net Profit after tax is ₹ 5,00,000/-. This profit is after charging Debenture Interest of Rs. 16,250/- ( i.e.Rs. 15000+ ₹ 1250).

Now please calculate Basic EPS and Diluted EPS.

In the beginning of the FY 2015-16 as on 1-4-2015, O/s no. of shares is 100,000 of Face value of ₹ 10. 20000 Fully 10 % convertible debentures of ₹ 10 each conversion ratio being 2 shares for each debenture. In June-2015, 5000 debentures were converted into 10000 shares. At the end of the year 2015-16, 15000 debentures pending for conversion. For the year FY 2015-16 Net Profit after tax is ₹ 5,00,000/-. This profit is after charging Debenture Interest of ₹ 16,250/- ( i.e.Rs. 15000+ ₹ 1250). Now please calculate Basic EPS and Diluted EPS.

Read more at: http://www.caclubindia.com/forum/basic-eps-amp-diluted-eps-374012.asp

[Ganeshan Kalyani]

The calculation need other aspect as well which in My view should be worked out with in person from practising tax consultant.

AI Summary

Diluted earnings per share must add back after tax interest and include shares from convertible debentures. The computation question concerns basic and diluted EPS for FY 2015-16: opening shares 100,000; 20,000 fully convertible 10% debentures (2 shares per debenture); 5,000 debentures converted in June 2015 into 10,000 shares; 15,000 debentures unconverted at year end; net profit after tax 500,000 after charging debenture interest 16,250. Basic EPS uses net profit divided by weighted average equity shares. Diluted EPS adjusts numerator by adding back after tax interest saved on assumed conversion and adjusts denominator to include shares issuable on conversion; precise timing and assumptions affect results.