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AS 20: Earnings Per Share

A professional application note for accounts teams: what the standard controls, where it appears in company accounting, how to apply it and what evidence reviewers expect. Animated notes with Play, Pause, Replay, English and Hindi voice options are included below.

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AS 20: Earnings Per Share: interactive explanation

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Professional scope: This is an implementation-oriented explanation for accountants, finance managers, controllers and reviewers responsible for company accounts.

1. What this standard controls

Basic and diluted earnings per share present profit attributable to equity shareholders relative to the weighted-average number of equity shares, adjusted for potential dilution.

Current position: Included in the ICAI Accounting Standards framework, subject to entity applicability, notified rules and later amendments.

2. Where it appears in the real accounting world

01Annual and interim EPS calculation
02Bonus issues, splits and rights issues
03Convertible instruments and options
04Continuing and discontinuing operations presentation

3. Practical application workflow

  1. Determine profit attributable to equity shareholders.
  2. Calculate weighted-average shares for time outstanding.
  3. Adjust retrospectively for bonus and split effects as required.
  4. Evaluate each potential equity share for dilution.
  5. Reconcile numerator and denominator to financial statements and capital records.

4. Real-world application example

A company issues bonus shares during the year. The denominator is adjusted as if the bonus existed from the beginning of the earliest period presented, ensuring comparability.

5. Journal-entry and accounting record pattern

Accounting entriesEPS is a calculation and disclosure; underlying share and profit entries are recorded separately.
Control recordNumerator bridge, weighted-average share schedule and dilution model.

Entry wording is illustrative. Actual accounts, tax effects, dimensions and narration depend on the entity’s chart of accounts and facts.

6. Month-end and year-end control file

Controls to operate

  • Share-capital movement reconciliation.
  • Board and regulatory filing review.
  • Instrument-wise dilution assessment.
  • Independent formula review.
  • Prior-period restatement check for bonus/split events.

Common errors and red flags

  • Using closing shares instead of weighted average.
  • Including anti-dilutive instruments.
  • Ignoring bonus-element adjustments.
  • Using total profit instead of attributable profit.
  • No reconciliation to share register.

7. Reviewer questions

  1. What profit belongs to equity shareholders?
  2. How long was each share tranche outstanding?
  3. Did any bonus, split or rights event require adjustment?
  4. Which potential shares are dilutive?
  5. Are basic and diluted EPS disclosures complete?

Related standards: AS 21, AS 24, AS 25

Authoritative reference:

Before approving a material conclusion, check the latest ICAI compendium, notified Companies (Accounting Standards) Rules, entity applicability and subsequent amendments.

ICAI Accounting Standards Compendium →
Companies (Accounting Standards) Rules and amendments →

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Professional note: This educational resource does not replace entity-specific analysis, the latest notified standard, law, regulation, audit judgment or professional advice.