Following are the facts given for X Ltd.: Income from continuing operations:90,00,000Loss from discontinued operations: (₹ 1,08,00,000)Net loss: (₹…

Calculation of Basic EPS: Basic EPS = Profit for the year / Weighted average Number of shares outstanding Basic EPS (Continued Operations) = Profit from continued operations / Weighted average Number of shares outstanding = 90,00,000/ 10,00,000 = 9.00 Basic Loss per share (Discontinued operations) = Loss from discontinued operations /Weighted average Number of shares outstanding = ₹ (1,08,00,000)/10,00,000 = (10.80) Overall Basic Loss per share = (₹ 18,00,000) / 10,00,000 = ₹ (1.80) (i) Calculation of Diluted EPS Diluted EPS = Profit for the year / Adjusted Weighted average Number of shares outstanding EPS (Continued Operations) = Profit from continued operations / Adjusted Weighted average Number of shares outstanding = 90,00,000 / 12,00,000 = 7.50 Loss per share (Discontinued operations) = Loss from discontinued operations/ Adjusted weighted average number of shares outstanding = ₹ (1,08,00,000) / 12,00,000 = (9.00) Overall Diluted Loss per share = 18,00,000 / 12,00,000 = (1.50) (ii) The income from continuing operations is the control number, there is a dilution in basic EPS for income from continuing operations (reduction of EPS from 9.00 to 7.50). Therefore, even though there is an anti-dilution [Loss per share reduced from 1.80 (i) to 1.50 (ii) above], diluted loss per share of 1.50 is reported. (ii) In case of loss from continuing operations, the potential shares are excluded since including those shares would result into anti-dilution effect on the control number (loss from continuing operations). Therefore, the diluted EPS will be calculated as under: Diluted EPS = Profit for the year / Adjusted weighted average number of shares outstanding Overall Profit = Loss from continuing operations + Gain from discontinued operations = ₹ (30,00,000) +1,08,00,000 = 78,00,000 Weighted average number of shares outstanding = 10,00,000 Diluted EPS = 7.80 The dilutive effect of the potential common shares on EPS for income from discontinued operations and net income would not be reported because of the loss from continuing operations.