Share capital and reserves (equity)

Publication date: 12 Apr 2018

Resources (This includes links to the latest standards, drafts, PwC interpretations, tools and practice aids for this topic)


Equity, along with assets and liabilities, is one of the three elements used to portray an entity's financial position. Equity is defined in the IASB's Framework as the residual interest in the entity's assets after deducting all its liabilities. The term 'equity' is often used to encompass an entity's equity instruments and reserves. Equity is given various descriptions in the financial statements. Corporate entities may refer to it as owners' equity, shareholders' equity, capital and reserves, shareholders' funds and proprietorship. Equity includes various components with different characteristics.

Determining what constitutes an equity instrument for the purpose of IFRS and how it should be accounted for falls within the scope of the financial instrument standard IAS 32, 'Financial instruments: Presentation'.

Equity instruments (for example, issued, non-redeemable ordinary shares) are generally recorded as the residual after recording the recognition or de-recognition of assets or liabilities arising on the equity issue (the proceeds of issue) and after deducting directly attributable transaction costs. Equity instruments are not re-measured after initial recognition.

Reserves include retained earnings, together with reserves such as fair value reserves, hedging reserves, asset revaluation reserves and foreign currency translation reserves and other statutory reserves.

Treasury shares

Treasury shares are deducted from equity. No gain or loss is recognised in profit or loss on the purchase, sale, issue or cancellation of an entity's own equity instruments.

Non-controlling interests

Non-controlling interests (previously termed 'minority interests') in consolidated financial statements are presented as a component of equity, separately from the parent shareholders' equity.


IAS 1, 'Presentation of financial statements', requires various disclosures. These include the total issued share capital and reserves, presentation of a statement of changes in equity, capital management policies and dividend information.

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