Accounting Business Reporting for Decision Making

CHAPTER 6 Statement of profit or loss and statement of changes in equity 243

Entities required to comply with accounting standards must present a statement of changes in equity.

The statement shows the change in an entity’s equity between two reporting periods. Effectively, the

statement of changes in equity is showing the impact of all of the changes in assets and liabilities during

the reporting period. The statement shows all changes in equity arising from transactions with owners in

their capacity as owners (such as equity contributions, dividends paid and shares purchased) separately

from non-owner changes in equity (e.g. profit). The purpose is to provide users with better information

by requiring aggregation of items with similar characteristics and separation of items with different

characteristics. Figure 6.9 shows JB Hi-Fi Ltd’s 2015 statement of changes in equity. The shareholders’

equity balance at 1 July 2014 was $294 633 000 and the closing balance at 30 June 2015 is $343 479 000.

JB Hi-Fi Ltd’s statement of changes in equity shows a reconciliation between the opening and closing

balance disaggregated by contributed equity, reserves and retained earnings. The illustration shows the

following.

• The reconciliation between the opening retained earnings balance at 1 July 2014 ($219 985 000) and

the closing balance at 30 June 2015 ($269 322 000). The $136 511 000 profit for the reporting period

(as shown in the statement of profit or loss) has increased the retained earnings. JB Hi-Fi Ltd has paid

dividends of $87 174 000 that have reduced the retained earnings balance.

• The reconciliation between the opening reserves balance at 1 July 2014 ($16 265 000) and closing

balance as at 30 June 2015 ($17 636 000). Some of the items resulting in a change in reserves are

items of other comprehensive income. For example, the foreign currency translation differences, value

of employee share payments and the change in the value of cash flow hedges have, as allowed or

required by accounting standards, bypassed the statement of profit or loss and gone directly to reserve

accounts in equity.

• The reconciliation between the opening contributed equity at 1 July 2014 ($58 383 000) and closing

contributed equity at 30 June 2015 ($56 521 000). The change in contributed equity during the

reporting period is due to issuing shares under the entity’s share option plan. JB Hi-Fi Ltd also did a

share buy-back during the year.

JB Hi-Fi Ltd

Statement of changes in equity

for the financial year ended 30 June 2015

Consolidated Notes

Contributed

equity

$’000

Reserves

$’000

Retained

earnings

$’000

Total

$’000

Balance at 1 July 2014

Profit for the year

Cash flow hedges (net of tax)

Exchange differences on translation of

foreign operations

58 383

—

—

—

16 265

—

1

(2 509)

219 985

136 511

—

—

294 633

136 511

1

(2 509)

Total comprehensive income for

the year

— (2 508 ) 136 511 134 003

Issue of shares under share option plan

Share buy-back

Share issue and buy-back costs (net of tax)

Dividends provided for or paid

Share-based payments — expense

Share-based payments — income tax

21

21

21

24

3 125

(4 970

(17

—

—

)

)

—

—

—

—

3 508

371

—

—

—

(87 174

—

)

3 125

(4 970

(17

(87 174

3 508

371

)

)

)

Balance at 30 June 2015 56 521 17 636 269 322 343 479

FIGURE 6.9 JB Hi-Fi Ltd Extract of statement of changes in equity for the financial year ended 30 June 2015

Source: JB Hi-Fi Ltd 2015, preliminary final report, p. 59.