What is the main purpose of the Statement of Changes in Equity?

The main purpose of the Statement of Changes in Equity is to detail changes in equity components over a specific period. This financial statement provides a comprehensive overview of how equity has changed during the reporting period, including contributions from owners, distributions to owners, adjustments for any prior period corrections, and the impact of net income or loss on retained earnings. By focusing on these changes, stakeholders can understand how the company's capital structure is evolving and the impacts of various transactions and events on shareholders' equity.

This statement is essential for investors, creditors, and management as it not only presents the starting and ending balances of equity accounts but also breaks down the movements within those accounts. This allows users to assess the financial health of a company, the level of retained earnings, and the effects of dividends or other distributions. Understanding these changes is crucial for evaluating a company's ability to generate and utilize profits effectively, thereby informing investment and operational decision-making.