earnings per share

= eps

The profit in pence attributable to each ordinary share in a company, based on the consolidated profit for the period, after deducting minority interests and preference share dividends. This profit figure is divided by the weighted average number of equity shares in issue during the period. The eps may be calculated on a net basis or a nil basis. Using the net basis, the tax charge includes any variable elements of tax, such as unrelieved overseas tax arising from the payment or proposed payment of dividends (see overseas-income taxation). The nil basis excludes such items from the tax charge. The eps should be shown on the face of the profit and loss account, both for the period under review and for the corresponding previous period. The basis of calculating the earnings per share should be disclosed on the face of the profit and loss account or in the notes to the accounts. Earnings per share was seen as an important measure of performance in the 1950s and 1960s but its significance has since declined. In recent years the UK and international standard setters have worked together to agree a common approach to eps. This resulted in the issuing of Financial Reporting Standard (FRS) 22, Earnings Per Share, to replace the earlier FRS 14 in 2004. This requires the disclosure of both basic eps and fully diluted earnings per share on the profit and loss account. See also bottom line