Statement of Changes in Equity

What is Statement of Changes in Equity?

Statement of Changes in Equity refers to the reconciliation of the opening and closing balances of equity in a company during a particular reporting period. It explains the connection between a company’s income statement and balance sheet and also includes all those transactions not captured in these two financial statements, such as dividend payment, equity withdrawal, accounting policies changes, and corrections of prior period errors, etc.

In the US, the Statement of Changes in Equity is also known as the SSThe statement of retained earnings is the financial record that reconciles the retained earnings fluctuation caused by the net income and dividend payout. It also shows the opening balance and closing balance of the retained earnings.read moretatement of Retained Earnings and is required under the US GAAP.

Purpose

This primary purpose of Statement of Changes in Equity is to provide details about all the movements in the equityEquityEquity refers to investor’s ownership of a company representing the amount they would receive after liquidating assets and paying off the liabilities and debts. It is the difference between the assets and liabilities shown on a company's balance sheet.read more account during an accounting periodAccounting PeriodAccounting Period refers to the period in which all financial transactions are recorded and financial statements are prepared. This might be quarterly, semi-annually, or annually, depending on the period for which you want to create the financial statements to be presented to investors so that they can track and compare the company's overall performance.read more, which is otherwise not available anywhere else in the financial statementsFinancial StatementsFinancial statements are written reports prepared by a company's management to present the company's financial affairs over a given period (quarter, six monthly or yearly). These statements, which include the Balance Sheet, Income Statement, Cash Flows, and Shareholders Equity Statement, must be prepared in accordance with prescribed and standardized accounting standards to ensure uniformity in reporting at all levels.read more. As such, it helps the shareholdersShareholdersA shareholder is an individual or an institution that owns one or more shares of stock in a public or a private corporation and, therefore, are the legal owners of the company. The ownership percentage depends on the number of shares they hold against the company's total shares.read more and investors in making more informed decisions about their investments. Further, it also allows the analysts and other readers of the financial statements to understand what factors resulted in the change in the equity capital.

Statement of Changes in Equity

You are free to use this image on your website, templates etc, Please provide us with an attribution linkHow to Provide Attribution?Article Link to be Hyperlinked
For eg:
Source: Statement of Changes in Equity (wallstreetmojo.com)

Formula

The formula for a statement of changes in equity includes the opening and closing value of the equity, net income for the year, dividends paid, along with other changes.

Opening Balance of Equity + Net Income – Dividends +/- Other Changes = Closing Balance of Equity

Steps to Prepare Statement of Changes in Equity

Opening Balance of Equity + Net Income – Dividends +/- Other Changes = Closing Balance of Equity

Example

Now, let us have a look at the annual report of Apple Inc. for the year 2019 and see how the statement of changes in equity is reported in real-life cases.

Example of Statement of Changes in Equity

Source: Apple SEC Filings

Recommended Articles

This has been a guide to What is Statement of Changes in Equity & its Definition. Here we discuss its formula along with example and how to prepare it. You can learn more about finance from the following articles –