Earnings per Share Tool
In mathematical terms the profit per share behaves strictly conversely to the P/E ratio. The P/E ratio is often used as the basis for purchase and sale decisions in comparisons between companies or shares.
Accordingly it is the aim of IAS 33 to guarantee extensive comparability of these figures for one company over the course of time as well as between different companies. This is done by a clear definition of the variables and calculation methods to be applied.
The calculation of earnings per share is to be done in undiluted form on the basis of the following formula:
Result for the period
Average number of outstanding shares during the period
Along with the calculation of the undiluted earnings per share the diluted earnings per share are also to be disclosed. Along with outstanding shares this also takes potential shares into account such as those which could be issued as part of a share options programme or convertible issues.
Accordingly, an adjustment for interest, tax and quantity effects for convertibles, share options, dividend effects or share splits has to be made on the basis of the undiluted earnings per share, taking into account the diluting effect.
To make this complex calculation easier FAS AG has developed an MS Excel-based tool.
Alongside the calculation of adjusting effects for diluted earnings per share this tool also makes it easier to prepare information for the notes to the annual financial statement in accordance with IAS 33, in which the adjustments to be made are described.
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