Definition
The statement of changes in equity (SOCIE) is a financial statement showing how each component of owners’ equity (share capital, share premium, retained earnings, reserves) moved over the period. It links the net profit on the income statement to the closing equity on the balance sheet by walking through every transaction that affected an equity account during the period.
What the statement of changes in equity means in practice
For a bookkeeper, the SOCIE is the bridge that makes the four primary financial statements articulate. Without it, the link between this period’s net profit and the closing balance-sheet equity is implicit. With it, every movement (profit, dividend, share issue, buyback, revaluation transfer) is laid out line by line.
The standard format is a matrix. Columns are the equity components: share capital, share premium, retained earnings, revaluation reserve, other reserves, total equity. Rows are the movements: opening balance, profit or loss for the period, dividends paid, shares issued, share buybacks, transfers between reserves, closing balance. Each row’s “total equity” column equals the sum of the component columns.
A practical example: a UK consultancy at 31 March 2027. Opening equity: 1,000 share capital, 60,000 retained earnings, 61,000 total. Movements during the year: net profit of 62,250 increasing retained earnings, and a 20,000 dividend reducing them. Closing equity: 1,000 share capital, 102,250 retained earnings, 103,250 total. The closing 103,250 ties exactly to the equity section of the closing balance sheet, and the 42,250 net movement in retained earnings ties to the difference between this year’s net profit on the income statement and the dividend paid out during the year.
How the statement of changes in equity works by country
United Kingdom
Required under FRS 102 Section 6 for medium and large entities. FRS 105 micro-entities (turnover under 632,000, balance-sheet total under 316,000, fewer than 10 employees) are exempt; they present movements in retained earnings as a footnote to the balance sheet instead. IFRS adopters use IAS 1 with substantively identical content.
Australia
Required under AASB 101 for reporting entities. The Statement of Changes in Equity sits between the income statement and the balance sheet in the standard lodgement format with ASIC. Small proprietary companies below the ASIC exemption thresholds are not required to lodge but most still prepare a SOCIE for management and tax purposes.
Canada
Required under ASPE Section 1540 for private companies or IAS 1 for public companies and IFRS-electing private companies. The Canadian convention sometimes uses “Statement of Retained Earnings” for private companies whose only equity movements are retained-earnings changes; the broader “Statement of Changes in Equity” is used where there are share-capital or reserve movements as well.
New Zealand
Required under NZ IAS 1 for Tier 1 and Tier 2 entities under the XRB framework. Tier 3 simple-format entities may use a simplified format showing only retained-earnings movements, in line with the simple-format reporting standard’s reduced disclosure requirements.
Singapore
Required under SFRS(I) 1 for full-IFRS entities. Smaller companies using SFRS for Small Entities present a simplified retained-earnings reconciliation rather than a full SOCIE, in line with the standard’s reduced disclosure framework.
Related terms
The statement of changes in equity is one of the four primary financial statements:
- The balance sheet is where the closing equity from the SOCIE appears.
- The income statement provides the net profit that flows into the SOCIE.
- Net profit is the largest line in most SOCIEs.
- Equity is the overarching balance-sheet category the SOCIE drills into.
- Retained earnings is typically the most active line.
- Share capital movements are also captured here.
See also
For the related financial statements, see the balance sheet, income statement, and cash flow statement entries.
FAQ
See the answered questions above for what the SOCIE shows, how net profit flows in, and small-company exemptions.