1. Primary Face presentation Mandates
An entity must present Basic and Diluted EPS with equal prominence on the face of the income statement for each class of common shares that has a different right to share in the profit for the period.
If an entity reports a discontinued operation, it must present the basic and diluted EPS amounts for that discontinued line either on the face of the income statement or in the footnotes. Even if an entity’s EPS is negative (reporting an Earnings Per Share Loss), the precise negative value must be calculated and displayed on the face of the statement.
 
2. Core Market Valuation Metrics Linked to EPS
EPS forms the foundation for several major market valuation models utilized by global investment communities:
  • Price-to-Earnings (P/E) Ratio: Measures the market price per share relative to its trailing annual accounting EPS.

    P/E Ratio = Current Market Price per Share / Earnings Per Share (EPS)
  • Dividend Payout Ratio: Measures the proportion of earnings distributed to investors relative to the amount retained to finance internal operations.

    Dividend Payout Ratio = Dividends Paid per Share / Earnings Per Share (EPS)

 
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