IAS 33 basic and diluted earnings per share

Earnings per share is one of the most quoted numbers in investment analysis, and price-earnings ratios are built on it. IAS 33 makes sure it is calculated the same way by every listed company. This guide explains basic and diluted EPS step by step, works through a company with a share issue, options and a convertible bond, and covers presentation, the IFRS 18 changes to adjusted EPS and how IAS 33 compares with US GAAP.

By Mirza Fahad Baig, Chartered Accountant. Reviewed by Hamza Fida, Chartered Accountant. 4 minute read.

Short answer

IAS 33 Earnings per Share requires companies whose ordinary shares are publicly traded, or are being issued to the public, to present basic and diluted earnings per share. Basic EPS is profit attributable to the parent's ordinary shareholders, after preference dividends, divided by the weighted average number of ordinary shares outstanding in the period; bonus issues and share splits are applied retrospectively to all periods shown. Diluted EPS adjusts both for potential ordinary shares that would reduce EPS: options and warrants are included using the treasury stock method, so only the shares issued for no consideration count, and convertible instruments using the if-converted method, adding back the interest saved after tax. Potential shares that would increase EPS are anti-dilutive and excluded, and instruments are added from the most dilutive to the least. Both figures are presented with equal prominence in the statement of profit or loss, for continuing operations and in total. From 2027, IFRS 18 limits any additional per share amounts to those based on its own subtotals or on management-defined performance measures. In this guide's example, basic EPS of CU 1.90 falls to diluted EPS of CU 1.64.

At a glance

Applies to
Publicly traded shares
Basic EPS
Profit over shares
Options
Treasury stock method
Convertibles
If-converted method
Anti-dilutive
Excluded
IFRS 18
Limits adjusted EPS
IAS 33 basic and diluted earnings per shareApplies to: Publicly traded shares; Basic EPS: Profit over shares; Options: Treasury stock method; Convertibles: If-converted method; Anti-dilutive: Excluded; IFRS 18: Limits adjusted EPS.KEY FACTS AT A GLANCEIAS 33 basic and diluted earnings per shareApplies toPublicly traded sharesBasic EPSProfit over sharesOptionsTreasury stock methodConvertiblesIf-converted methodAnti-dilutiveExcludedIFRS 18Limits adjusted EPSTax BakersIAS 33 basic and diluted earnings per shareApplies to: Publicly traded shares; Basic EPS: Profit over shares; Options: Treasury stock method; Convertibles: If-converted method; Anti-dilutive: Excluded; IFRS 18: Limits adjusted EPS.KEY FACTS AT A GLANCEIAS 33 basic and diluted earningsper shareApplies toPublicly traded sharesBasic EPSProfit over sharesOptionsTreasury stock methodConvertiblesIf-converted methodAnti-dilutiveExcludedIFRS 18Limits adjusted EPSTax Bakers
Key facts at a glance, as set out in this guide.

Who must apply IAS 33?

Companies whose ordinary shares or potential ordinary shares are traded in a public market, or that are filing to issue them, in both their consolidated and separate financial statements. Other companies that choose to present EPS must follow it too. In consolidated statements, EPS is based on profit attributable to the parent's ordinary equity holders. See IFRS 10 consolidation.

How is basic EPS calculated?

The numerator is profit or loss attributable to ordinary equity holders of the parent, after deducting preference dividends: dividends declared on non-cumulative preference shares, and the full period's dividend on cumulative ones whether declared or not. The denominator is the weighted average number of ordinary shares outstanding, weighting shares issued or bought back by the time they were outstanding and excluding treasury shares. Bonus issues, share splits and share consolidations change the number of shares without changing resources, so they are applied to all periods presented, and a rights issue below market price includes a bonus element adjusted for in the same way. See IAS 32 debt or equity for when preference shares are equity.

How is diluted EPS calculated?

  • Options and warrants: the treasury stock method assumes the proceeds are used to buy shares at the average market price, so only the shortfall, the shares effectively issued for nothing, is added. Options are dilutive only when their exercise price is below the average market price.
  • Convertible bonds and preference shares: the if-converted method adds the shares that would be issued and adds back the interest or dividends, net of tax, that would no longer be paid.
  • Contingently issuable shares: included if the conditions would be met at the reporting date.
  • Ordering: each instrument is ranked by its earnings per incremental share, and added from the most dilutive; any that would increase EPS from continuing operations is excluded as anti-dilutive.

IAS 33 in practice: basic and diluted EPS

A company's profit attributable to ordinary shareholders is CU 20,000 thousand. It had 10,000 thousand shares at the start of the year and issued 2,000 thousand for cash on 1 October. It has 1,000 thousand options with an exercise price of CU 8 when the average share price was CU 12, and CU 5,000 thousand of 5% bonds convertible into 1,500 thousand shares, with tax at 25%.

StepEarnings, CU thousandShares, thousandEPS, CU
Basic: 10,000 + 2,000 x 3/1220,00010,5001.90
Options: 1,000 - 1,000 x 8/120+3331.85
Convertible: interest saved 5,000 x 5% x (1 - 25%)+187.5+1,5001.64
Diluted20,187.512,3331.64
From basic to diluted EPS (CU)From basic to diluted EPS (CU)1.90BasicEPS-0.05Shareoptions-0.21Convertiblebonds1.64DilutedEPS
Each potential share is added from the most dilutive, and only if it reduces EPS.

The options are added first because they bring shares with no extra earnings. The convertible adds CU 0.125 of earnings per extra share, below the 1.85 reached after the options, so it is dilutive too. Had the bonds carried a much higher coupon, their earnings per incremental share could exceed EPS and they would be excluded as anti-dilutive. The options exist because of a share scheme; see IFRS 2 share-based payment.

What must be presented and disclosed?

Basic and diluted EPS for profit from continuing operations and for total profit, with equal prominence, in the statement of profit or loss, for every period presented, even when they are negative. EPS for discontinued operations goes in the statement or the notes. The notes reconcile the earnings and share numbers used, list instruments excluded because they were anti-dilutive, and describe significant share transactions after the reporting date.

What changes with IFRS 18?

From 1 January 2027, IFRS 18 amends IAS 33 so that a company may disclose additional per share amounts only if the numerator is attributable to ordinary equity holders of the parent and is either a total or subtotal defined by IFRS 18, such as operating profit, or a management-defined performance measure. These amounts go in the notes, with basic and diluted figures given equal prominence, and an adjusted EPS based on a management-defined performance measure brings in that measure's reconciliation and disclosures. See IFRS 18 management-defined performance measures.

How does IAS 33 compare with ASC 260?

The two are largely converged. Differences remain in details, such as how year-to-date diluted EPS is computed in interim reports and the treatment of some contracts that may be settled in shares or cash; since ASU 2020-06, US GAAP also uses the if-converted method for convertible instruments. See IFRS vs US GAAP key differences, IAS 34 interim financial reporting and ASC 260 earnings per share.

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Questions people ask

How is basic EPS calculated under IAS 33?

Profit attributable to the parent's ordinary shareholders, after preference dividends, divided by the weighted average number of ordinary shares outstanding in the period.

How are share options included in diluted EPS?

By the treasury stock method: only the shares that would be issued for no consideration, using the average market price, are added, and only when the options are in the money.

What does anti-dilutive mean?

A potential ordinary share that would increase earnings per share, or reduce loss per share, if converted; it is excluded from diluted EPS.

Does IFRS 18 change adjusted EPS?

Yes. From 2027, additional per share amounts must use a total or subtotal defined by IFRS 18 or a management-defined performance measure, and be disclosed in the notes.

Sources

Every fee, date and rule on this page was taken from these official and primary sources.

  1. IFRS Foundation: IAS 33 Earnings per Share
  2. IFRS Foundation: IFRS 18 Presentation and Disclosure in Financial Statements
  3. BDO Australia: IFRS 18, more expense, MPM and earnings per share disclosures

Rules and fees change. If you are reading this long after October 21, 2026, confirm the figures with the source before you rely on them.

IFRS 2IFRS 2 share-based payment: equity-settled and cash-settledIFRS 18Management-defined performance measures (MPMs) under IFRS 18IFRS 18IFRS 18 explained: what changes and when

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This guide is general information. It is not tax or legal advice for your situation.