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ABC Ltd. repurchases preference shares with carrying amount ₹100 each for ₹120 each cash. For EPS purposes:
A₹20 charged to P&L as exceptional item
B₹20 premium recorded as preference dividend deduction in arriving at profit attributable to ordinary equity holders
CNo EPS adjustment because nothing hits P&L
D₹20 charged to goodwill
Answer & Solution
Correct answer: B. ₹20 premium recorded as preference dividend deduction in arriving at profit attributable to ordinary equity holders
Excess of FV of consideration over carrying amount of preference shares is a return to preference shareholders and is debited to retained earnings. For EPS purposes, it is treated as a preference dividend and deducted from the numerator — even though nothing hits P&L.
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