Define: Diluted Earnings Per Share

UK Accounting Glossary

Definition: Diluted Earnings Per Share



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Full Definition of Diluted Earnings Per Share


Diluted earnings per share is earnings per share that fully reflects the impact the firm’s dilutive securities (eg, convertible bonds) may have on earnings per share. Diluted earnings per share is distinguished from basic earnings per share, both of which are computed by dividing net income by the weighted average number of outstanding shares. But only diluted earnings per share assumes the exercise of stock options and warrants, and the conversion of convertible bonds and preferred shares, in computing outstanding shares. Because diluted earnings per share entail spreading net income over more outstanding shares, the additional equity dilutes (ie, reduces) earnings on a per-share basis. Diluted earnings per share is thus the more conservative measure of earnings per share. The computation and presentation of diluted earnings per share is determined by Statement of Financial AccoAccounting Standards 128. Diluted earnings per share ranks among accounting’s most thorny issues and the computation of diluted earnings per share can be extremely complex.


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Definition Sources


Definitions for Diluted Earnings Per Share are sourced/syndicated and enhanced from:

  • A Dictionary of Economics (Oxford Quick Reference)
  • Oxford Dictionary Of Accounting
  • Oxford Dictionary Of Business & Management

This glossary post was last updated: 9th February, 2020