The Statement of Changes in Equity, also known as the Statement of Shareholders' Equity, is a financial statement that shows the changes in a company's equity accounts over a specific period. It provides information on how the company's equity has been affected by various transactions, including investments by shareholders, net income or loss, dividends, and other comprehensive income.
The Statement of Changes in Equity typically includes the following components:
Opening Balance of Equity: The beginning balance of equity at the start of the period.
Net Income or Loss: The net income or loss for the period, which represents the profit or loss generated by the company's operations.
Additional Paid-In Capital: The changes in equity resulting from additional investments made by shareholders, such as issuance of new shares or contributions to share capital.
Share Buybacks or Treasury Stock: The changes in equity resulting from the repurchase of company shares or treasury stock, which reduces the total number of outstanding shares.
Dividends: The distributions made to shareholders from the company's earnings as dividends. Dividends can be in the form of cash, stock, or other assets.
Other Comprehensive Income: The changes in equity resulting from gains or losses that are not included in the net income, such as unrealized gains or losses on available-for-sale securities, foreign currency translation adjustments, or certain pension adjustments.
Share-based Payments: The changes in equity resulting from the issuance of shares or stock options to employees or other parties as part of compensation plans.
Changes in Accounting Policies: The impact on equity resulting from changes in accounting policies, which may arise from new accounting standards or revisions to existing ones.
Other Changes in Equity: Any other transactions or events that affect equity but are not included in the categories mentioned above.
Closing Balance of Equity: The ending balance of equity at the end of the period, which is the sum of the opening balance and the changes in equity resulting from the various transactions.
The Statement of Changes in Equity provides important information for shareholders and other stakeholders to understand the factors that have influenced the company's equity position during the period. It helps track the changes in shareholders' investments, retained earnings, and other comprehensive income, providing insights into the company's financial health, profitability, and capital structure.
