MODULE 6 –

Statement of changes in
equity

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 LEARNING OUTCOMES

Discuss the definition and purpose of the SoCE

Understand the different items within the SoCE

Prepare the SoCE of an entity

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 CORE CONTENT

This module covers the discussion of the Statement of Changes in

Equity, its definition, purpose and preparation

The different items found within the SCE will also be discussed, as well
as the relationship of the SCE to the other types of financial
statements

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Definition of Statement of Changes in Equity

Statement of Changes in Equity, often referred to as Statement of

Retained Earnings in U.S. GAAP, details the change in owners’ equity over
an accounting period by presenting the movement in reserves comprising
the shareholders’ equity. 

Like the SCI and SCF, the SoCE is dated “for the year-ended”, which
means the statement shows the transactions for the year that
reconciles the beginning balance of equity to its year-end balance. 

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 Movement in shareholders’ equity over an accounting period comprises the
following elements:

Net profit or loss

Increase or decrease
during the accounting Dividend payments to
in share capital
period attributable to shareholders
reserves
shareholders

Gains and losses

Effect of changes in Effect of correction of
recognized directly in
accounting policies prior period error
equity

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Components
Following are the main
elements of statement
of changes in equity

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 Opening Balance

The opening balance is unadjusted

This represents the balance of in respect of the correction of prior
shareholders’ equity reserves at the period errors rectified in the
start of the comparative reporting current period and also the effect of
period as reflected in the prior changes in accounting policy
period’s statement of financial implemented during the year as
position these are presented separately in
the statement of changes in equity

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Effect of Changes in
Accounting Policies

• Since changes in accounting

policies are applied
retrospectively, an adjustment
is required in stockholders’
reserves at the start of the
comparative reporting period
to restate the opening equity to
the amount that would be
arrived if the new accounting
policy had always been applied

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 Effect of Correction of Prior Period Error

The effect of the corrections may

not be netted off against the
The effect of correction of prior
opening balance of the equity
period errors must be presented
reserves so that the amounts
separately in the statement of
presented in current period
changes in equity as an adjustment
statement might be easily
to opening reserves
reconciled and traced from prior
period financial statements

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Restated Balance
• This represents the
equity attributable to
stockholders at the start
of the comparative
period after the
adjustments in respect of
changes in accounting
policies and correction of
prior period errors as
explained above

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 Changes in Share Capital

Issue of further share capital during the period must be added in the
statement of changes in equity whereas redemption of shares must be
deducted therefrom

The effects of issue and redemption of shares must be presented

separately for share capital reserve and share premium reserve

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Dividends

• Dividend payments issued

or announced during the
period must be deducted
from shareholder equity
as they represent
distribution of wealth
attributable to
stockholders

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Income / Loss for
the period
• This represents the profit
or loss attributable to
shareholders during the
period as reported in the
income statement

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 Changes in Revaluation Reserve

Revaluation gains recognized in

Revaluation gains and losses income statement due to reversal
recognized during the period must of previous impairment losses
be presented in the statement of however shall not be presented
changes in equity to the extent that separately in the statement of
they are recognized outside the changes in equity as they would
income statement already be incorporated in the
profit or loss for the period

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 • Any other gains and losses not
recognized in the income statement
Other Gains may be presented in the statement of
& Losses changes in equity such as actuarial
gains and losses arising from the
application of IAS 19 Employee Benefit

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Closing Balance

• This represents the

balance of shareholders’
equity reserves at the end
of the reporting period as
reflected in the statement
of financial position

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 Purpose and Importance

Whereas movement in shareholder

reserves can be observed from the
Statement of changes in equity helps balance sheet, statement of changes in
users of financial statement to identify equity discloses significant information
the factors that cause a change in the about equity reserves that is not
owners’ equity over the accounting presented separately elsewhere in the
periods financial statements which may be
useful in understanding the nature of
change in equity reserves

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Purpose and Importance -
continuation

• Examples of such information

include share capital issue and
redemption during the period, the
effects of changes in accounting
policies and correction of prior
period errors, gains and losses
recognized outside income
statement, dividends declared and
bonus shares issued during the
period

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 SESSION SUMMARY
Statement of Changes in Equity provides information on the reason behind any change in equity
during the period

The components of the SoCE includes, but are not limited to, the following: opening balance; any
adjustments to the opening balance including changes in accounting policy and prior period errors;
changes in equity, including issuance of shares and/or dividends, the income or loss for the year,
and any revaluation gain; and the closing balance

An entity shall prepare a statement of changes in equity and present it as an integral part of the
financial statements for each period for which financial statements are presented

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