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STATEMENT
OF CHANGES IN EQUITY
LEARNING OUTCOMES
• LO1: Describe the definitions of terms in statements of profit or
loss and other comprehensive income, and changes in equity
• LO2: Comprehend the concepts of income
• LO3: Understand the recognition and measurement of income
and expenses (including gains and losses)
• LO4: Describe the general structure of a statement of profit or
loss and other comprehensive income
• LO5: Discuss detailed presentation in the profit or loss
• LO6: Classify other comprehensive income items
• LO7: Describe the components of statement of changes in
equity 2
DEFINITIONS OF TERMS
DEFINITIONS OF TERMS
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DEFINITIONS OF TERMS
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DEFINITIONS OF TERMS
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DEFINITIONS OF TERMS
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DEFINITIONS OF TERMS
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DEFINITIONS OF TERMS
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DEFINITIONS OF TERMS
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DEFINITIONS OF TERMS
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DEFINITIONS OF TERMS
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DEFINITIONS OF TERMS
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DEFINITIONS OF TERMS
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DEFINITIONS OF TERMS
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CONCEPTS OF INCOME
INCOME
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EXPENSES
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EXPENSES
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EXPENSES
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EXPENSES
All other costs are normally expensed in the period in which they are
incurred. This would include those costs for which no clear-cut future
benefits can be identified, costs that were recorded as assets in prior
periods but for which no remaining future benefits can be identified,
and those other elements of administrative or general expense for
which no rational allocation scheme can be devised.
The general approach is first to attempt to match costs with the
related revenues. Next, a method of systematic and rational allocation
should be attempted. If neither of these measurement principles is
beneficial, the cost should be immediately expensed.
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GAINS AND LOSSES
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GAINS AND LOSSES
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STATEMENT OF PROFIT OR
LOSS AND OTHER
COMPREHENSIVE INCOME
STRUCTURE AND CONTENT
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STRUCTURE AND CONTENT
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STRUCTURE AND CONTENT
IAS 1 stipulates that, in addition to items required by other IFRS, the profit and loss
section of the statement of profit or loss and other comprehensive income must
include line items that present the following amounts for the period (if they are
pertinent to the entity’s operations for the period in question):
1. Revenue;
2. Finance costs;
3. Share of the profit or loss of associates and joint ventures accounted for by the
equity method;
4. Tax expense;
5. A single amount for the total of discontinued operations.
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STRUCTURE AND CONTENT
IAS 1 stipulates that, in addition to items required by other IFRS, the profit and loss
section of the statement of profit or loss and other comprehensive income must
include line items that present the following amounts for the period (if they are
pertinent to the entity’s operations for the period in question):
1. Revenue;
2. Finance costs;
3. Share of the profit or loss of associates and joint ventures accounted for by the
equity method;
4. Tax expense;
5. A single amount for the total of discontinued operations.
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STRUCTURE AND CONTENT
In addition, an entity should disclose the following items on the face of the
statement of profit or loss and other comprehensive income as allocations:
1. Profit or loss for the period attributable to:
a. Non-controlling interest; and
b. Owners of the parent.
2. Total comprehensive income for the period attributable to:
a. Non-controlling interest; and
b. Owners of the parent.
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PRESENTATION IN THE PROFIT
OR LOSS
STATEMENT TITLE
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REPORTING PERIOD
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COMPARATIVE INFORMATION
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CLASSIFICATION OF EXPENSES
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CLASSIFICATION OF EXPENSES
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CLASSIFICATION OF EXPENSES
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CLASSIFICATION OF EXPENSES
2. Cost of goods sold is the cost of the inventory items sold during the period.
For merchandising entities: net purchases (purchases less discounts, returns, and allowances
plus freight-in) are added to the beginning inventory to obtain the cost of goods available for
sale. From the cost of goods available-for-sale amount, the ending inventory is deducted to
compute the cost of goods sold.
For manufacturing entities: Cost of goods manufactured would be added to the beginning
inventory to arrive at cost of goods available for sale. The ending finished goods inventory is
then deducted from the cost of goods available for sale to determine the cost of goods sold.
The cost of goods manufactured is computed by adding to raw materials on hand at the
beginning of the period the raw materials purchased during the period and all other costs of
production, such as labour and direct overheads, thereby yielding the cost of goods placed in
production during the period. When adjusted for changes in work in process during the period
and raw materials on hand at the end of the period, this result in the cost of goods produced.
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CLASSIFICATION OF EXPENSES
3. Operating expenses are primary recurring costs associated with central operations,
other than the cost of goods sold, which are incurred to generate sales. Operating
expenses are normally classified into the following two categories:
a. Distribution costs (or selling expenses);
b. General and administrative expenses.
Distribution costs are those expenses related directly to the entity’s efforts to generate
sales (e.g., sales salaries, commissions, advertising, delivery expenses, depreciation of
store furniture and equipment, and store supplies). General and administrative expenses
are expenses related to the general administration of the company’s operations (e.g.,
officers and office salaries, office supplies, depreciation of office furniture and fixtures,
telephone, postage, accounting, and legal services, and business licenses and fees).
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CLASSIFICATION OF EXPENSES
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CLASSIFICATION OF EXPENSES
5. Separate disclosure items are items that are of such size, nature,
or incidence that their disclosure becomes important to explain the
performance of the enterprise for the period. Examples of items that,
if material, would require such disclosure are as follows:
a. Write-downs and subsequent reversals of such write-downs;
b. Costs of restructuring the activities of an enterprise and any
subsequent reversals of such provisions;
c. Costs of litigation settlements;
d. Other reversals of provisions.
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CLASSIFICATION OF EXPENSES
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CLASSIFICATION OF EXPENSES
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CLASSIFICATION OF EXPENSES
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OTHER COMPREHENSIVE INCOME
OTHER COMPREHENSIVE INCOME
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OTHER COMPREHENSIVE INCOME
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OTHER COMPREHENSIVE INCOME
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STATEMENT OF CHANGES IN
EQUITY
STATEMENT OF CHANGES IN EQUITY
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STATEMENT OF CHANGES IN EQUITY
The following should be disclosed, either in the statement of financial position or the
statement of changes in equity or in the notes:
1. For each class of share capital:
• Number of shares authorised;
• Number of shares issued and fully paid, and issued but not fully paid;
• Par value per share, or that the shares have no par value;
• Recognition of the number of shares outstanding at the beginning and the end
of the periods;
• Any rights, preferences, and restrictions attached;
• Shares in the entity held by the entity or its subsidiaries; and
• Shares reserved for issue under options and contracts for the sale of shares,
including terms and amounts.
2. A description of the nature and purpose of each reserve within equity. 51
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