Earnings per share meaning

Earnings per share (EPS) describes, in practice, the amount of profit attributable to each ordinary share, used widely in financial reporting, disclosure and valuation. It is calculated as profit after tax attributable to ordinary shareholders divided by the weighted average number of ordinary shares in issue for the period. EPS underpins the price/earnings (P/E) ratio. EPS is not defined in company law or case law; it is an accounting measure defined by IAS 33 Earnings per Share. Listed companies must present basic and diluted EPS (the latter reflecting potential ordinary shares such as options and convertibles) in their annual and interim financial statements in accordance with IAS 33. Across England & Wales, Scotland and Northern Ireland, listed issuers apply UK‑adopted IFRS (including IAS 33). In Ireland, listed issuers apply IFRS as adopted by the EU. Entities reporting under UK/Irish GAAP (FRS 102) are not generally required to present EPS. For legal practitioners, EPS figures appear in prospectuses, listing particulars, circulars, takeover documents and profit forecasts, and are often referenced in executive remuneration and share plan performance conditions. Care is needed where “adjusted EPS” or other alternative performance measures are used to ensure the basis of calculation and any adjustments are clearly disclosed...