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ABC Ltd. induces early conversion of preference shares by paying additional consideration of ₹1 per share on 1 lakh shares. For basic EPS of that year:
ANo adjustment because conversion does not affect P&L
B₹1,00,000 added to profit
CCapitalised to goodwill
D₹1,00,000 deducted from profit attributable to ordinary equity holders for basic EPS
Answer & Solution
Correct answer: D. ₹1,00,000 deducted from profit attributable to ordinary equity holders for basic EPS
Excess paid to induce early conversion = return to preference shareholders → deducted from numerator for EPS (₹1 × 1,00,000 = ₹1,00,000). The accounting in books debits retained earnings, but the EPS adjustment is explicit.
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