What is a statement of changes in equity?

A statement of changes in equity is a financial document that illustrates the movements in equity within a specific period, typically a fiscal year. This statement includes details about various components of equity, such as share capital, retained earnings, and any other reserves. It reflects changes due to factors like profits or losses from operations, dividends distributed to shareholders, and other comprehensive income items. The examination of equity changes is crucial for understanding how ownership interest in the company is evolving over time, especially in response to the performance and financial decisions made by the business.

The statement of changes in equity provides stakeholders, including investors and management, valuable insights into how shareholder wealth is being affected by the company’s operational results and decisions regarding profit retention and distribution. This comprehensive view helps in assessing the growth and sustainability of the entity, making it a critical part of the overall financial reporting framework for businesses.