Four (4) limitation of earning per share (EPS) reporting

Earnings per share (EPS) is the portion of a company’s profit allocated to each outstanding share of common stock. Earnings per share serves as an indicator of a company’s profitability. Despite the number of advantages related to earning per share reporting there are several limitations associated with earning per share reporting.

The following are limitation of reporting earning per share:

  • Inflation is not considered.
  • Historical cost information from the financial statements is used so the productive value is low
  • The choice of accounting policies affects EPS of an entity
  • Window dressing of financial statements raises earnings unnecessarily to deceive shareholders

I hope you have enjoyed reading this post, if you wish to know more please ask or share your ideas on the comment below. Also, if you want to build the blog like this to help solve problems for others check with interserver they will help you with domain name and web hosting.

1 thought on “Four (4) limitation of earning per share (EPS) reporting”

  1. Pingback: Revision question on the calculation of earning per share per IAS 33. - ACCA ONLINE ACCOUNTING TEACHER

Leave a Comment

Your email address will not be published. Required fields are marked *

%d bloggers like this: