XYZ Limited has a wholly owned subsidiary BC Limited. The Group prepares consolidated Financial Statements for the year ended 31st March, 2024. XYZ…
CA Intermediate · Advanced Accounting · RTP · January 2025
XYZ Limited has a wholly owned subsidiary BC Limited. The Group prepares consolidated Financial Statements for the year ended 31st March, 2024. XYZ Limited (in its separate financial statements) has incurred a loss of 2 crore during the year, while the consolidated profit for the group during the year is 40 lakh. XYZ Limited has 5,00,000 shares outstanding as at 31st March, 2024. Further, it has granted options to issue equity shares as at that date. In respect of such options, 1,00,000 shares are considered to be the shares issued for no consideration. There are no changes in income or expenses that are expected from the issue of equity shares on exercise of these options. Calculate Basic and Diluted EPS for XYZ Limited for separate financial statements and for the Group.
Suggested Answer and Working Notes:
Computation of earnings per share Particulars Consolidated financial statements Standalone financial statements of XYZ Limited Basic earnings/(loss) per share 8 [40,00,000/5,00,000] (40) [2,00,00,000/5,00,000] Diluted earnings/ (loss) per share 6.66 [40,00,000/6,00,000] (40) [2,00,00,000/5,00,000] As per paragraph 39 of AS 20 “Potential equity shares should be treated as dilutive when, and only when, their conversion to equity shares would decrease net profit per share from continuing ordinary operations. In the above case, if the exercise of options was considered for separate financial statements of XYZ Limited, the diluted loss per share would have reduced to 33.33 [2,00,00,000/6,00,000]. As this is antidilutive, the options would not be treated as potentially dilutive equity shares. Accordingly, in the separate financial statements of XYZ Limited, the Diluted EPS would be same as Basic EPS.
Topics: AS 20, AS 19
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