58 TEXTBOOK Flashcards
The Statement of Stockholders’ Equity
The statement of stockholders’ equity is a financial statement that summarizes the changes in
stockholders’ equity during a period and includes the following accounts:
1. Contributed capital accounts (e.g., common stock, preferred stock, and paid-in capital in
excess of par) related to investments by owners
2. Retained earnings, including net income (loss) and distributions to owners
3. Accumulated other comprehensive income, also called reserves under IFRS30
4. Treasury stock
5. Noncontrolling interests
Although the balance sheet reports the final balances in each of these accounts, the statement
of stockholders’ equity provides an analysis of the changes in these accounts for the year.
Stockholders’ Equity Requirements
Although U.S. GAAP does not require a statement of stockholders’ equity, it is required by the SEC. Thus, U.S. non-public companies are not required to provide the statement of stockholders’ equity with their financial statements. However, most non-public companies do include a statement of tockholders’ equity on a voluntary basis.
Statement of Stockholders’ Equity Accounts
In general, changes in contributed capital accounts are related to additional investments by equity
investors and purchases and disposals of treasury stock by the entity. The net income (or loss) of
the entity along with dividend declarations result in changes to the entity’s retained earnings. Items included in other comprehensive income close into accumulated other comprehensive income.
Exhibit 5.18 illustrates the equity components changed by net income, comprehensive
income, and transactions with owners. Net income increases retained earnings whereas net losses and dividends decrease retained earnings. Also, positive other comprehensive income will increase accumulated other comprehensive income, and negative other comprehensive income (loss) will decrease accumulated other comprehensive income. Finally, share issuances and the sale of treasury shares increase contributed capital, while share repurchases decrease it.
Statement of Stockholders’ Equity, Kimberly-Clark Corporation, Financial Statements, December 31, 2016
Exhibit 5.19 presents Kimberly-Clark’s 2016 Statement of Stockholders’ Equity. The first column reports the number of issued shares of common stock. The second column reports the dollar amount of common stock issued and the third the amount of additional paid-in-capital. The number of shares and dollar amount in treasury stock, which reduces equity, is in the next two columns. Retained earnings is in the sixth column, which increases with net income and decreases with dividends. The second-to-last column presents accumulated other comprehensive income.
The last column represents the noncontrolling interests.
Describe the components of and the reporting requirements for the statement of stockholders’ equity.
