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An entity's preference shares are classified as a financial LIABILITY. The interim period sees an unfavourable change to the conversion terms that pays preference shareholders an additional ₹20,000 to induce conversion. EPS impact:
AAdd ₹20,000 to numerator
BNo EPS adjustment because the preference shares are liability-classified
CDeduct ₹20,000 from numerator (still applies even though preference shares are a liability)
DReclassify ₹20,000 to OCI
Answer & Solution
Correct answer: B. No EPS adjustment because the preference shares are liability-classified
When preference shares are LIABILITY-classified, the dividends and any extinguishment costs (including induced-conversion premiums) hit P&L as finance costs / loss on settlement — already inside the EPS numerator. No further EPS adjustment is required.
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