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ACCOUNTING STANDARD (AS) 20
EARNINGS PER SHARE
The objective of this Standard is to prescribe principles for the
determination and presentation of earnings per share which will
improve comparison of performance among different enterprises for
the same period and among different accounting periods for the
same enterprise. The focus of this Standard is on the denominator of
the earnings per share calculation. Even though earnings per share
data has limitations because of different accounting policies used for
determining ‘earnings’, a consistently determined denominator
enhances the quality of financial reporting.
1. This Standard should be applied by all companies. However, a
Small and Medium Sized Company, as defined in the
Notification, may not disclose diluted earnings per share (both
including and excluding extraordinary items).
2. In consolidated financial statements, the information
required by this Statement should be presented on the basis of
For the purpose of this Standard, the following terms are used with the meanings
1. An equity share is a share other than a preference share.
2. A preference share is a share carrying preferential rights to dividends and
repayment of capital.
3. A financial instrument is any contract that gives rise to both a financial asset of
one enterprise and a financial liability or equity shares of another enterprise.
4. A potential equity share is a financial instrument or other contract that entitles,
or may entitle, its holder to equity shares.
5. Share warrants or options are financial instruments that give the holder the
right to acquire equity shares.
6. Fair value is the amount for which an asset could be exchanged, or a liability
settled, between knowledgeable, willing parties in an arm’s length transaction.
• This statement is applicable to the enterprise whose equity
shares or potential equity shares are listed in stock exchange
& It is to be reported by the enterprises on the face of the
statement of profit and loss a/c.
TYPES OF EPS
• Basic Earnings Per Share
• Basic earnings per share should be calculated by dividing the net
profit or loss for the period attributable to equity shareholders by
the weighted average number of equity shares outstanding during
• Diluted Earnings Per Share
• For the purpose of calculating diluted earnings per share, the net
profit or loss for the period attributable to equity shareholders and
the weighted average number of shares outstanding during the
period should be adjusted for the effects of all dilutive potential
ACCOUNTING STANDARD (AS) 21
CONSOLIDATED FINANCIAL STATEMENTS
The objective of this statement is to present financial statements of parent
and its subsidiaries as a single economic entity. They are treated as one.
Consolidated profit/loss account and consolidated balance sheet are
prepared for disclosing the total profit/loss of the group and total assets
and liability of the group.
PARENT COMPANY:- It is an enterprise that has one or more subsidiaries.
SUBSIDIARY COMPANY:- It is an enterprise that is controlled by other
enterprises known as parent.
• 1. This Standard should be applied in the preparation and
presentation of consolidated financial statements for a group
of enterprises under the control of a parent.
• 2. This Standard should also be applied in accounting for
investments in subsidiaries in the separate financial statements
of a parent.
FORMAT OF CONSOLIDATED FINANCIAL STATEMENTS
Application of other accounting standards in preparation of
consolidated financial statements would be in the same
manner as they apply in preparing the separate financial
Consolidated financial statements are no substitutes for
separate financial statements.
Dissimilar activities of parent and its subsidiaries cannot be
the ground for non-consolidation of financial statements.
The parent company has to consolidate the financial
statements of all its subsidiaries, whether domestic or foreign.
CONSOLIDATED FINANCIAL STATEMENTS MEANING
• Consolidated financial statements present an aggregated look
at the financial position of a parent and its subsidiaries, they
enable you to gauge the overall health of an entire group of
companies as opposed to one company's stand alone position.
ACCOUNTING STANDARD – 22
ACCOUNTING FOR TAXES ON INCOME
Comes into effect from 1st April, 2001
Mandatory in Nature
Applicable for all enterprises
For accounting periods commencing on or after 1st April 2003
Prescribe accounting treatment for taxes on income in accordance
with the matching concept:
Matching of taxes with the corresponding revenue and expenses since
taxable income significantly varies with the accounting income
Difference between items of Revenue and expense as per profit & Loss
account and those considered for tax purpose.
Difference between the amount of the items of Revenue and expenses as per
profit and loss account and those considered for tax purpose.
Applied For accounting for taxes on income:
Determination of expenses or savings related to taxes on income for a
Disclosure of such amount in Financial Statement.
Includes both domestic and foreign taxes.
Tax payable on distribution of dividends and other distribution not
1. Accounting income (loss) is the net profit or loss for a period, as reported in the
statement of profit and loss, before deducting income tax expense or adding income tax
2. Taxable income (tax loss) is the amount of the income (loss) for a period, determined
in accordance with the tax laws, based upon which income tax payable (recoverable) is
3. Tax expense (tax saving) is the aggregate of current tax and deferred tax charged or
credited to the statement of profit and loss for the period.
4. Current tax is the amount of income tax determined to be payable (recoverable) in
respect of the taxable income (tax loss) for a period.
5. Deferred tax is the tax effect of timing differences.
6. Timing differences are the differences between taxable income and accounting
income for a period that originate in one period and are capable of reversal in one or
more subsequent periods.
7. Permanent differences are the differences between taxable income and accounting
income for a period that originate in one period and do not reverse subsequently.