Accounting for earnings per share

Keywords: Mazars, Thailand, Accounting, TAS 33, EPS, IAS 33

23 May 2022

What are earnings per share?

Earnings per share are a company's net profit divided by the number of ordinary shares it has outstanding.

Thai Accounting Standard (TAS) 33, ‘Earnings per Share’, addresses this. Therefore, the calculation and disclosure of earnings per share must comply with this standard, and applies to the separate or individual financial statements of an entity or the consolidated financial statements of a group with a parent:

1. the ordinary shares or potential ordinary shares of which are traded in a public market (a domestic or foreign stock exchange or an over-the-counter market, including local and regional markets); or
2. which files, or is in the process of filing, its financial statements with a securities commission or other regulatory organization for the purpose of issuing ordinary shares in a public market.

Whilst disclosure of EPS is only mandatory for publicly accountable entities reporting under Thai Financial Reporting Standards, the Thai Federation of Accounting Professions allows non-publicly accountable entities to calculate EPS and to disclose this in their financial statements as additional information which might be helpful for users of the financial statements. The calculation and disclosure must be done in compliance with TAS 33.

Calculating earnings per share

An entity must calculate basic EPS for profit or loss attributable to ordinary equity holders of the parent entity and, if presented, profit or loss from continuing operations attributable to those equity holders.

EPS must be calculated by dividing profit or loss attributable to ordinary equity holders of the parent entity (the numerator) by the weighted average number of ordinary shares outstanding (the denominator) during the period.

When calculating basic EPS, the amounts attributable to ordinary equity holders of the parent entity in respect of; (a) profit or loss from continuing operations attributable to the parent entity, and (b) profit or loss attributable to the parent entity, shall be the amounts for (a) and (b) adjusted for the after-tax amounts of preference dividends, differences arising on the settlement of preference shares, and other similar effects of preference shares classified as equity.

Scenario

As of 31 December 2020, Company A had issued 150,000 ordinary shares at a par value of THB 100 each. Therefore, total share capital was THB 15,000,000.

On 30 June 2021, the board of directors passed a resolution to increase the Company’s ordinary share capital from THB 15 million to THB 20 million (divided into 200,000 ordinary shares at a par value of THB 100 each).  

Company A issued additional shares for which the shareholders subscribed and registered the increase in share capital with the Department of Business Development on 1 July 2021.

Company A’s profit for 2021 was THB 30 million.

Issue

How should EPS be calculated? 

Response

TAS 33 states that, when calculating basic EPS, the number of ordinary shares shall be the weighted average number of ordinary shares outstanding during the period. As a result, Company A’s earnings per share should be calculated as follows:

Therefore, Company A’s earnings per share for 2021 were THB 171.23.

When disclosing EPS, Company A must disclose the amounts used as the numerators to calculate basic EPS, and the weighted average number of ordinary shares used as the denominator when calculating basic EPS, as well as a reconciliation of these two numbers.

References (in Thai language): TAS 33, and IAS 33.