Reading and Understanding a Statement of Changes in Equity
1 hour 30 minutes
Learn how to identify and locate all relevant information regarding equity in an entity’s financial statements.
Many financial statement users focus on an entity’s periodic results of operations and the makeup of its resources and obligations. Equity, meanwhile, is often seen as a single amount to be divided among equity holders in proportion to the amount owned. Due to the use of various types of securities representing equity of an entity, claims are not necessarily divided proportionately.
Each transaction affecting stockholders’ equity may represent a significant change to the rights of an equity holder and the amount of any distributions an equity holder may be entitled to. Understanding information reported in an entity’s financial statements enables a user to interpret what each equity interest represents and to understand the significance of the amounts at which various components of equity are measured on the financial statements.
This material will discuss the various components included in stockholders’ equity, how the priorities are established for each type of equity interest and amounts attributable to the various equity security holders. You will learn how to identify and locate all relevant information regarding equity in an entity’s financial statements. You will be able to read a statement of changes in stockholders’ equity and to interpret disclosures in the context of reported equity.
• You will be able to define stockholders’ equity and the various components of it.
• You will be able to describe various types of financial instruments included in stockholders’ equity.
• You will be able to explain the priorities of claims different equity holders are entitled to upon distributions of entity resources or liquidation.
• You will be able to identify all financial statement elements related to equity and the extent to which requirements have been met.