Diluted earnings per share
Adjust the numerator and weighted average denominator for each relevant instrument as if conversion or issue occurred under IAS 33 assumptions. For options, use the prescribed treasury-share approach; for convertible debt, consider the after-tax interest saved if conversion is assumed. Include only dilutive instruments and assess them in the required order. Basic and diluted EPS must be interpreted together.
Worked example
A company has ordinary earnings of $200,000 and 100,000 weighted average shares. Options create 10,000 incremental shares using the IAS 33 calculation; with no numerator adjustment, diluted EPS is $200,000 ÷ 110,000 = $1.82, compared with basic EPS of $2.00.
Common mistake
Adding all option shares to the denominator without the required calculation, or including anti-dilutive instruments that increase EPS.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | FR | Direct | September 2026–June 2027 |
| ACCA | SBR | Direct | September 2026–June 2027 |