Audit of Shareholders Equity
Audit of Shareholders Equity
contributed by owners
Components of Shareholder’s Equity
Share Capital issued XXX Two methods of accounting for share capital
Subscribed share capital XXX - Memorandum method
Less: Subscription receivable (XXX) XXX - Journal entry method
Share premium: Legal Capital – portion of the paid in capital which cannot
Share premium excess over par XXX be returned to stockholders in any form. Consists of par
Share premium – treasury XXX value of the shares and shares issued and subscribed.
Share premium conversion option – XXX
Convertible bonds payable Legal capital (with par value)
Donated capital XXX Share capital XXX
Share premium Warrants Outstanding XXX Subscribed share capital XXX
Share premium options outstanding XXX XXX Total Legal Capital XXX
Total paid in capital XXX
Legal capital (no par) XXX
Retained earnings – unappropriated XXX Share capital XXX
Retained earnings – appropriated XXX XXX Paid in capital in excess of stated value XXX
Total legal capital XXX
Other comprehensive income (cumulative balance)
Revaluation surplus XXX Organization cost and expenses related to share capital
Unrealized gain or loss on FVOCI XXX 1. Legal fees in connection with the incorporation
Remeasurement gain or loss PAS19 XXX 2. Incorporation feed
Translation gain or loss XXX 3. Share issuance cost
Cash flow hedge – effective portion XXX
Change in FV due to credit risk of - Organization costs, except share issuance cost,
Designated FVPL XXX XXX shall be recognized as expense in the first year of
TOTAL XXX operations
Less: Treasury shares XXX - Share issuance costs shall be accounted as a
TOTAL SHAREHOLDER’S EQUITY XXX deduction from equity, net of any related income
tax benefit. Stock issuance cost shall be debited in
Share Capital – paid-in capital representing amount of the the following order:
total par or stated value of shares issued. Portion of the o Share premium from issuance
authorized capital that has been fully paid. o Share premium from previous issuance
o Retained earnings
- Subscribed share capital – portion of the share - Indirect costs shall be charged as expense
capital that the investor agreed to purchase.
Added to the Share Capital Watered share – share issued at discount or for
inadequate/insufficient consideration or consideration
- Subscription receivable – refers to unpaid portion received at less than par value.
of the subscribed share capital. Netted against - Related discount on share capital shall be
subscribed share capital. Presented as current presented as deduction to total shareholder’s
asset if collectible currently. equity
Secret reserve – it arises when asset is understated or
- Reserves – generally includes stockholders’ equity liability is overstated with a consequent understatement
items other than the total par or stated value of of capital.
capital stock and unrestricted retained earnings
o Share premium reserve
o Revaluation reserve
o Retained earnings reserve
o Net changes reserve
Foreign currency translation
reserve
Equity adjunct or contra reserve
Non-detachable warrants
- stock warrants that can be traded separately from
the security
o issuance of warrant:
memo entry
o exercise of warrant:
cash xx
share capital xx
share premium (if any) xx
o expiration of warrant:
memory entry
Detachable warrants
- stock warrants that can be traded separately from
the security
- share warrants issued with preference shares
o both fair value known – use relative fair
value method (proportion method)
o only one has fair value – use increment
method
o both fair value unknown
market value of ordinary shares xx
less: option price/exercise price xx
intrinsic value of warrant xx