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 equity shares.
The
amount of net profit or loss for the period attributable to equity
shareholders should be adjusted, after taking into account any
attributable change in tax expense for the period. The number of equity
shares should be the aggregate of the weighted average number of equity
shares (as per paragraphs 15 and 22 of AS 20) and the weighted average
number of equity shares which would be issued on the conversion of all
the dilutive potential equity shares into equity shares. Dilutive
potential equity shares should be deemed to have been converted into
equity shares at the beginning of the period or, if issued later, the
date of the issue of the potential equity shares.
An enterprise should assume the exercise of dilutive options and other dilutive potential equity shares of the enterprise. The assumed proceeds from these issues should be considered to have been received from the issue of shares at fair value. The difference between the number of shares issuable and the number of shares that would have been issued at fair value should be treated as an issue of equity shares for no consideration.