IAS 33 - Earnings per Share (Simplifying EPS)
- Filipe Alves
IAS 33 and the US equivalent, FASB Statement No. 128 Earnings Per Share are substantially the same. IAS 33 and FASB Statement No. 128 currently use a method known as the treasury stock method for calculating the effects of dilutive options and warrants in the diluted earnings per share calculation.
In 2005, the FASB proposed a change to FASB Statement No. 128 with regard to the treasury stock method. The proposed amendment changes the application of the treasury stock method applicable to options and warrants. The amendment would change the definition of assumed proceeds to include the carrying amount of an option or warrant classified as a liability.
At the March 2007 Board meetings, the FASB and the IASB decided to make the following changes to the proposal:
A new method, known as the fair value method, be used for all instruments subject to the treasury stock method that can be settled in cash or shares, are classified as a liability and are measured at fair value with changes in fair value in profit or loss; and
The fair value method be used for all instruments subject to the if-converted method that can be settled in cash or shares, are classified as a liability and are measured at fair value with changes in fair value recognised in profit or loss.
The IASB also decided to require the two-class method for computing basic earnings per share for mandatorily convertible instruments with a stated participation right.
On 7 August 2008 the IASB published an Exposure Draft Simplifying Earnings per Share Proposed amendments to IAS 33.
EFRAG issued its comment letter in response to the exposure draft in December 2008.
On 22 April 2009 the IASB reviewed a summary of responses to the exposure draft. In light of other priorities, the IASB directed the staff to consider, at a later date, when the best time for the IASB to start reviewing the responses in more detail would be.