Key Points
- The statement reconciles opening and closing equity, making every movement (profit, dividends, share issues, OCI items) visible in one place.
- IAS 1.106(d) requires separate presentation of transactions with owners acting in their capacity as owners, split between contributions and distributions.
- Retrospective restatements under IAS 8 appear here as adjustments to retained earnings, not in profit or loss.
- A complete set of financial statements under IAS 1.10 includes this statement; omitting it renders the financial statements incomplete.
What is Statement of Changes in Equity?
IAS 1.106 requires the entity to present a statement of changes in equity showing, for each component of equity, the total comprehensive income for the period (split into amounts attributable to the parent and to non-controlling interests), the effects of retrospective application or restatement under IAS 8, and transactions with owners. The standard expects separate columnar presentation for share capital, share premium, retained earnings, each reserve (revaluation surplus, translation reserve, hedging reserve, treasury shares, among others), and non-controlling interests.
IAS 1.106A gives the entity the choice of presenting dividends and per-share dividend amounts either in this statement or in the notes. Most European preparers include dividends on the face of the statement because it makes the reconciliation self-contained and reduces the need for cross-referencing.
The statement connects the other three primary financial statements. Profit or loss for the period (from the statement of profit or loss) and OCI items flow into their respective equity columns. The closing balances tie to the equity section of the statement of financial position. When auditors perform their final analytical review, they trace these linkages to confirm that the four primary statements articulate correctly. A difference between total equity per the balance sheet and total equity per the statement of changes in equity is a red flag that something was posted to the wrong period or component.
IFRS 18 (effective 1 January 2027) carries forward the IAS 1 requirements for this statement without material change. Entities preparing for the transition do not need to redesign the equity statement, although they should verify that any new disaggregation requirements affecting the balance sheet or income statement have been reflected consistently in the equity reconciliation.