Financial Reporting Standard B-4 (NIF B-4) is key to the presentation and understanding of the statement of changes in shareholders' equity, providing relevant information for all those interested in the financial analysis of an entity. This NIF details the movements that directly affect the owners' investment.
What is the Statement of Changes in Shareholders' Equity?
The statement of changes in shareholders' equity is one of the basic financial statements and shows the changes in an entity's equity during a specific accounting period. This document details the increases, decreases, contributions and distributions of the owners of an entity, as well as the application of retained earnings.
Objective of NIF B-4
The purpose of NIF B-4 is to establish specific standards for the presentation and structure of the statement of changes in equity, allowing entities to offer information that helps users understand:
- How owners' investment has changed over the period.
- Comprehensive results and other movements affecting shareholders' equity.
- The relationship between management's financial decisions and their impact on assets.
General Structure of the Statement of Changes in Shareholders' Equity
NIF B-4 indicates that the statement of changes in equity must include, at least, the following elements:
- Opening balance of shareholders' equity. This section shows the capital situation at the beginning of the period.
- Adjustments for retrospective application of accounting changes and error corrections. Corresponds to adjustments derived from the retrospective application of the NIF B-1 Accounting Changes and Error Corrections.
- Adjusted opening balances. It results from the algebraic sum of the initial balances of equity and the adjustments by retrospective application of the NIF B-1.
- Owner movements. Includes any additional capital contributed, capital repayments, dividend decrees, capitalizations, among others.
- Comprehensive income for the period. The net results obtained are reported here, including other comprehensive income (OCI) that directly affect equity, such as actuarial gains or losses, changes in the fair value of investments, among others.
- Reservations. The reservations created, modified or used during the period are detailed.
- Closing balance of shareholders' equity. The total at the end of the period after all previous movements.
Importance of the Statement of Changes in Shareholders' Equity
This financial statement is essential for shareholders, analysts, and other stakeholders, as it allows them to assess the financial strength of a company and its ability to generate value. The correct application of NIF B-4 is crucial to ensure that movements in shareholders' equity are presented in a transparent and reliable manner, facilitating informed decisions.
Conclusion
NIF B-4 provides a solid framework for reflecting movements in shareholders' equity, ensuring that changes in an entity's equity are presented in a comprehensible, transparent and comparable manner. By 2024, companies must be aware of movements that affect their shareholders' equity, complying with the provisions established by this NIF to offer relevant and useful information to all their stakeholders.