Chapter 10/Example 7: CS Statement of Changes in Equity

Statements of changes in equity are not in the F7 syllabus

The example is there because I haven’t done a separate recording / chapter for statements of changes in equity and yet you DO need them for questions on preparation of single entity financial statements

(1) “Where does $33,500 deduction come from? It’s the loss for the year and it’s shown as the final figure in the Consolidated Statement of Profit or Loss IMMEDIATELY above the heading Consolidated Statement of Changes in Equity

(2) “when we do W3b/f why do we use RE per question as RE per question minus Retained Earnings for the year?”

Because the retained earnings as at the end of the year is the aggregation of retained earnings brought forward as adjusted (increased or decreased as appropriate) for retained earnings this year. So, if I know retained earnings at the end of the year and I know retained earnings for the year, then I can calculate retained earnings brought forward

(3) “Why do we not take any share of £49000 RE in Liga, but show it as a gain of the group instead?”

Because, at the end of the year, Liga is no longer a subsidiary

(4) “We don’t deduct any NCI in CS SOFP but we only show it in Statement of Changes in equity, why so?”

Because, at the end of the year there is no subsidiary and therefore no non-controlling interest

“Also, the Consolidated Statement of Financial Position: why do we have to show receivable in the group and subsequently tax it if on the next day the group, as such, doesn’t exist?”

The question tells us that “The disposal has not yet been reflected in Diana’s financial statements” so the $400,000 sale proceeds has not yet been recorded and must therefore still be a receivable as at the year end

We’re not taxing the receivable. We’re taxing the gain on the sale by Diana of her investment in the Liga subsidiary

“… if on the next day the group, as such, doesn’t exist?”

Are you asking here whether it’s correct that Diana should be taxed on the gain made on the sale when in fact Diana no longer holds those shares? Are you really asking that?

Try to understand the logic behind the “b/f'”s and “c/f”s in the statement of changes in equity – much better to understand what’s happening and why rather than simply try to memorise “standard” procedures … because the examiner doesn’t always ask questions that fit into “standard” format!

“I am sorry for loading you with petty queries, hope you could help to get me back on the track”

Don’t worry about asking questions – that’s why Opentuition was set up – to help students like you to sort out issues before they get into the exam room

Hopefully I’ve managed to get you back on track