Identify who controls settlement before selecting the EPS model
Ind AS 33 paragraph 58 presumes share settlement for a contract settleable in cash or ordinary shares at the entity's option, including the resulting potential shares if dilutive. Paragraph 60 instead requires the more dilutive cash or share alternative where the holder has the choice. This guide, checked on 28 October 2026, concerns that decision and its earnings bridge, rather than general basic EPS or the separate written-repurchase calculation. Ind AS 33: paragraphs 33, 36–44 and 58–61.
Read the actual rights, not management's expectation
Obtain executed terms and amendments identifying the party with the enforceable settlement choice. Management's intention to pay cash is not a replacement for paragraph 58's share-settlement presumption. Conversely, a holder-controlled alternative needs comparison of both outcomes. Determine the number and timing of shares from the actual contract, and distinguish a contingent entitlement from an unconditional settlement choice. Ind AS 33: paragraphs 33, 36–44 and 58–61.
The numerator can change as well as shares
Paragraph 59 addresses contracts presented as assets or liabilities, or with equity and liability components. Adjust the numerator for changes in profit or loss which would have resulted if the contract had been classified wholly as equity, similarly to paragraph 33. Do not automatically add shares while retaining a numerator containing incompatible instrument expenses or income. Establish any consequential and tax effects on supported facts. Ind AS 33: paragraphs 33, 36–44 and 58–61.
Use comparable alternatives
For holder choice, calculate the applicable cash and share outcomes on the same reporting basis and period. The more dilutive outcome is not necessarily the one with the greater number of shares: numerator effects can reverse the result. Preserve ordinary-equity-attributable earnings, continuing-operations control earnings, the actual adjustment and weighted shares for each alternative. The illustrations use already verified after-tax numerator adjustments as explicit assumptions, not an invented tax rate. Ind AS 33: paragraphs 33, 36–44 and 58–61.
Dilution and time weighting remain necessary
Paragraphs 36–44 address timing, dilution control and sequencing. A late-period contract does not automatically contribute a full-year extra denominator. In a simple continuing-loss example with no numerator change, adding shares reduces loss per share and is anti-dilutive. Where other potential shares exist, test the actual combined computation and sequence rather than treating each simplified example as the company's final EPS. Ind AS 33: paragraphs 33, 36–44 and 58–61.
Keep assumed settlement separate from actual accounting
The diluted-EPS calculation is not an actual payment or share issue and does not itself reclassify the financial instrument in the balance sheet. Paragraph 61 gives examples of cash-or-share contracts, but the legal form and instrument accounting still require their own review. Preserve separate and consolidated bases correctly. Round the reported EPS only after the complete numerator and weighted-denominator workings. Ind AS 33: paragraphs 33, 36–44 and 58–61.
Applicable primary references
Ind AS 33: paragraphs 33, 36–44 and 58–61
Six worked illustrations
All facts and amounts below are fictional. Assumptions describe the model, not additional statutory rules.
Illustrative example 1: Issuer-controlled choice
Assume basic ordinary-attributable continuing earnings ₹20,00,000, basic weighted shares 10,00,000, a whole-year issuer-choice contract adding 2,00,000 shares and no numerator change. Share settlement gives ₹20,00,000/12,00,000 = ₹1.666666…, or ₹1.67, against basic EPS ₹2.00. It is dilutive despite an intention to pay cash.
Illustrative example 2: Liability expense affects the numerator
On the same share counts, assume the verified paragraph 59 after-tax adjustment increases earnings by ₹1,00,000. Adjusted numerator is ₹21,00,000 and share-settlement EPS ₹1.75. Using the unadjusted ₹20,00,000 would give ₹1.666666… and omit the stated numerator effect.
Illustrative example 3: Holder chooses the more dilutive outcome
Assume the holder controls settlement, cash-settlement EPS is ₹2.00 and the fully calculated share alternative is ₹21,00,000/12,00,000 = ₹1.75. Use ₹1.75 under the more-dilutive comparison on these facts. Do not substitute management's preferred cash outcome.
Illustrative example 4: More shares need not be more dilutive
For a holder-choice contract, assume cash EPS ₹2.00 but verified share-settlement numerator ₹27,00,000 and denominator 12,00,000 give ₹2.25. The cash outcome ₹2.00 is more dilutive than ₹2.25. A denominator-only comparison would select the wrong alternative.
Illustrative example 5: Anti-dilution in a simple loss case
Assume issuer choice, continuing loss ₹20,00,000, basic shares 10,00,000 and potential extra shares 2,00,000 with no numerator effect. Basic loss per share is ₹2.00; the share assumption would reduce its magnitude to ₹1.666666…. That is anti-dilutive, so exclude the extra shares in this simple case.
Illustrative example 6: Part-period contract
Assume a reasonable half-year weighting for 2,00,000 potential shares under a dilutive issuer-choice contract, with no numerator adjustment. Weighted increment is 1,00,000. Earnings ₹22,00,000 divided by total weighted shares 11,00,000 give diluted EPS ₹2.00, against basic EPS ₹2.20 on 10,00,000 shares.
Ten-step verification table
| Step | Action | Evidence |
|---|---|---|
| 1 | Confirm the EPS framework | Ind AS and standalone or consolidated basis |
| 2 | Obtain executed contract terms | Settlement rights and amendments |
| 3 | Identify the controlling party | Issuer choice or holder choice |
| 4 | Establish accounting presentation | Asset, liability, equity or combined components |
| 5 | Compute the numerator adjustment | Wholly-equity comparison and after-tax effects |
| 6 | Determine potential shares | Contractual quantities and conditions |
| 7 | Apply period weighting | Issue date, duration and changes |
| 8 | Compare settlement alternatives | Applicable paragraph 58 or 60 decision |
| 9 | Test dilution and sequencing | Continuing-operations control and other instruments |
| 10 | Reconcile the published EPS | Earnings bridge, weighted shares and final rounding |
Sixteen practitioner FAQs
1. Which provision concerns issuer choice?
Paragraph 58 of Ind AS 33.
2. Can an intention to pay cash override its share presumption?
Not merely because management prefers cash; apply the contract and the standard.
3. Which provision concerns holder choice?
Paragraph 60, requiring the more dilutive cash or share outcome.
4. Does the larger denominator always give the more dilutive outcome?
No. Numerator changes can reverse the comparison.
5. When does paragraph 59 matter?
For the stated asset, liability or combined-component presentations requiring the wholly-equity profit-or-loss comparison.
6. Is every liability expense automatically added back in full?
Determine the actual supported paragraph 59 adjustment and applicable consequential effects.
7. Are the examples' adjustments pre-tax assumptions?
They are explicitly assumed verified after-tax numerator adjustments.
8. Can actual basic earnings be combined with an unrelated consolidated denominator?
No. Preserve the correct reporting basis.
9. Do all contracts use full-year weighting?
No. Apply the relevant period-outstanding rules.
10. Is half-year weighting compulsory?
No. It is an expressly assumed reasonable approximation in one illustration.
11. Can extra shares be anti-dilutive during a loss?
Yes, as shown by the simple continuing-loss example.
12. What earnings figure controls dilution?
Apply the standard's continuing-operations control framework and relevant adjustments.
13. Does assumed settlement itself issue actual shares?
No. It is an EPS computation assumption.
14. Does the EPS model change balance-sheet classification automatically?
No. Instrument accounting is a separate analysis.
15. Are contingencies irrelevant for these contracts?
No. Identify any actual conditions and apply the relevant additional provisions.
16. What makes the final comparison reproducible?
Executed terms, controlling-party analysis, numerator bridge, weighted shares and outcome comparison.
Conclusion
Compare diluted EPS for cash-or-share contracts under Ind AS 33, distinguishing the issuer’s settlement choice from the holder’s more-dilutive alternative.