Our company has issued non-cumulative preference shares paying 4% interest each year.

We report the dividends on preference shares in the profit or loss as a finance cost.

What adjustment shall we make when calculating earnings per share? Is it after tax or before tax?


After tax.

The reason is that the preference dividends are treated as an expense and the related tax on them represents tax saving that is NOT attributable to ordinary shareholders.

However, you should always look at whether preference dividends in the specific country are tax deductible (treated as cost) or not (treated as profit appropriation).

Also, let me warn you that if the net profit after tax has already contains the expense for preference dividends, then no adjustment is necessary.

Please see IAS 33 par. 14a for your reference.


On 1 January 20X1 the ABC’s share capital was 100 000 ordinary shares of CU 1 each and 20 000 3% redeemable preference shares of CU 1 each. There was no change in share’s structure during the year.

The net profit after tax, but before paying the preference share dividends was CU 3 000. The tax rate is 20%.

The basic earnings per share is therefore:

  • Numerator – earnings:
    • Net profit after tax: CU 3 000
    • Less preference share dividends after tax: – 20 000*3%*(100-20%) = – 480
    • Adjusted net profit after tax: CU 2 520
  • Denominator – weighted average number of ordinary shares: 100 000
  • Basic earnings per share = 2 520/100 000 = 0.0252 CU per share