A statement of changes in shareholders' equity is a report to indicate the changes in the elements of shareholders' equity. The statement shall specify the beginning balance for capital stock, capital reserves, retained earnings (or accumulated deficit), and any other shareholders' equity items; increased or decreased items and amounts in the current period; ending balance, etc.
The contents of retained earnings are as follows:
- Beginning balance.
- Prior period adjustments to profits and losses: correction of errors in the calculation, recording, and recognition of loss and profit items and in the use of accounting principles and methods for the prior period.
- Current net income or net loss.
- Allocation of legal reserve, special reserve, and distribution of dividends, etc.
- Ending balance. Income tax expense (benefit) arising from such items as prior period adjustments to profits and losses, unrealized profit and loss items not included in current profit and loss but directly recorded under shareholders' equity (e.g. translation adjustments), and change in capital reserves shall be directly included in each such item that will then be shown in net amount.