What is a Statement of Shareholders’ Equity?

A statement of shareholders' equity details the changes within the equity section of the balance sheet over a designated period of time. The report provides additional information to readers of the financial statements regarding equity-related activity during a reporting period. The statement is particularly useful for revealing stock sales and repurchases by the reporting entity; a publicly-held company in particular may engage in these activities on an ongoing basis. Investors are most interested in this statement, since they can use it to delve into the changes in equity that have occurred during the reporting period. A sample presentation of a statement of shareholders’ equity appears in the following exhibit.

Structure of the Statement of Shareholders’ Equity

The statement of shareholders’ equity is typically set up in a grid pattern, with the beginning balance in each element of equity stated across the top, additions to and subtractions from the beginning balances in the middle of the report, and ending balances at the bottom that incorporate the additions and subtractions. The same format should be used in all subsequent periods, to provide reporting consistency to the reader. The columns in the matrix may contain several of the following items:

Common stock. Adds the sales of common stock during the period.
Preferred stock. Adds the sales of preferred stock during the period.
Retained earnings. Adds profits, subtracts losses, and subtracts dividends during the period.
Treasury stock. Adds stock purchased and subtracts treasury stock re-issued during the period.
Accumulated other comprehensive income. Adds and subtracts a variety of unrealized gains and losses during the period.
Totals column. Includes all of the preceding column totals in aggregate.

There may also be a separate column listing the number of shares of common stock at the beginning of the period, any adjustments to that number during the period, and the number of shares of common stock at the end of the period. The approach may apply to separate additional columns for other classes of preferred stock.

There will be grand total figures at the top and bottom of the matrix for the total amount of beginning and ending shareholders' equity.

Alternatively, the statement could present a single column of numbers, beginning with the total shareholders' equity (from all sources) at the top, then adjusting for any changes during the period, and ending with the total shareholders' equity (from all sources) at the bottom.