Statement of changes in equity

What it means

The statement of changes in equity shows how each component of equity changed during the year: registered capital, capital funds, funds created from profit, retained earnings or accumulated losses, the current year's result, dividends paid and revaluation differences.

It links the balance sheet at the start and end of the year. It explains why equity changed, for example through profit, shareholder contributions, dividend payments, a capital increase or a revaluation of assets that did not pass through the profit and loss statement.

Under IFRS, the statement of changes in equity is a mandatory part of the financial statements. Slovak entities reporting under Slovak rules generally disclose this information in the notes, with the extent depending on the entity's size.

How it works in practice

The statement is prepared from the movements on equity accounts during the year. Typical items are the transfer of the prior year's result according to the profit distribution decision, allocations to funds, dividend payments and the current year's result.

For shareholders and investors, the statement shows how much profit the company paid out and how much it retained for growth. In company analysis it helps uncover changes not visible in the profit and loss statement, such as large revaluations or transactions with shareholders.

When preparing the financial statements, it is worth checking that changes in equity match general meeting resolutions, commercial register entries and booked movements. A mismatch may signal an accounting error or a missing resolution.

What to watch out for

Dividend payments must respect statutory limits, such as the ban on distributing profit if this would put the company in crisis or push equity below a set level. The statement of changes in equity helps monitor these limits.

Some changes in equity, such as revaluation differences on securities or hedging derivatives, may have tax consequences or affect deferred tax. Their accounting and disclosure must be assessed carefully.