Statement of Changes in Stockholders' Equity Template

Statement of Changes in Stockholders' Equity Template – Description

This financial statement breaks down into more detail the changes in stockholder's equity (also called shareholder's equity) that took place during the fiscal year. The more complicated and diverse the equity structure is, the more important this statement is. It provides a breakdown of the various kinds of stock transactions and effects on retained earnings. All businesses need to keep track of their equity regardless of complexity.

Definitions used in the Statement of Changes in Stockholders' Equity template:

Common Stock. Securities that represent equity ownership in a company. Common shares allow an investor to vote on such issues as the election of directors. Preferred stockholders tend to have no voting rights. Common shares also give the holder a share in a company's profits via dividend payments or the capital appreciation of the security. Units of ownership of a public corporation with junior status to the claims of secured/unsecured creditors, bondholders and preferred shareholders in the event of liquidation. If the company decides to pay out a small amount of dividends, the money is first allocated to preferred stockholders. This implies that common shareholders could not get any dividends.

Preferred Stock. Stock ownership that gives holders dividends before common stockholders. These stockholders get assets of the company in the event that it goes out of business before other types of stockholders do.

Treasury Stock. A company's own stock that it purchases. It is buying back common stock and the ownership rights of its own company. Treasury stock shares are subtracted from the value of stockholder's equity while all other forms of stock are added.

Unrealized Gains and Losses. Unrealized amounts on available–for–sale securities are recorded here. The corresponding asset is recorded in the asset section at the purchase price. Recall that they are unrealized gains and losses because you do not feel the real impact until a sale occurs, but you must keep track of increases or decreases for accounting valuation purposes. You calculate this by computing the difference between what you paid for the asset, or what it was worth at last year's balance sheet date, and what the market value of the asset is at the time the current balance sheet date.

Retained earnings. Earnings the company has accummulated since its inception not paid out as dividends but instead reinvested in the business or used to pay off debt. Also called earned surplus or accumulated earnings or unappropriated profit. If a company has had a loss greater than beginning retained earnings, retained earnings will become negative, creating a deficit.

Dividends. Payments from retained earnings to shareholders in order to compensate them for their investments.

Foreign Currency Translation. Process of expressing amounts denominated in one currency in terms of a second currency by using an exchange rate between the currencies. Assets and liabilities are translated at the current exchange rate at the balance sheet date. Income statement items are typically translated at the weighted–average exchange rate for the period. Cumulative (total) translation gains and losses are reported separately as a component of Stockholders' Equity under the heading Accumulated Other Comprehensive Income. They are not included in net income unless there is a sale or liquidation of the investment in the foreign entity. (This usually applies only to very large international companies.)