Components of shareholders’ equity

Owner’s equity 

  • Residual interest in assets that remains after subtracting an entity’s liability
  • Include: 
    • Contributed capital (31) 
      • Amount contributed by equity common shareholders
      • Par value (31-1) 
        • Stated value
        • No relationship to fair value
        • Proceeds from issuing equity security = par value + additional paid-in capital (APIC) (31-2)
          • Value of share capital above its stated par value and is an accounting item under Shareholders’ Equity on the balance sheet.
      • Authorized shares (31-2)
        • The number of shares that a corporation is legally allowed to issue,
      • Issued shares  (31-3)
        • Actually sold to shareholders
        • the number of outstanding shares is always equal to or less than the number of authorized shares
      • Outstanding shares (31-4)
        • Issued shares – shares that are reacquired by the firm
    • Preferred stock (32)
      • Owned by preferred shareholders
      • Has rights and privileges not conferred by common stock
      • Fixed rate dividends, as a percentage of par value
      • Have priority over claims of the common stock in the event of liquidation
      • Perpetual preferred stock that is non-redeemable → equity
      • Preferred stock that calls for mandatory redemption in fixed amount → financial liability 
    • Treasury stock (33)
      • Stock reacquired by issuing firm but not yet retired
    • Retained earnings (34)
      • Not paid out to shareholders as dividends
    • Non-controlling interest (35)
      • Shares of a net assets of a subsidiary that is not wholly owned by the parent
    • Accumulated comprehensive income (36)
      • All changes in stockholders’ equity except for transactions
        • Unrealized gains and losses from available-for-sale securities 
        • Cash flow hedging derivatives
        • Foreign currency translation
        • Adjustments for minimum pension liability
  • Statement of changes in stockholders’ equity 
    • All transactions that increase or decrease the equity accounts for the period