CFM16030 - Accounting for financial instruments: IAS 32 and IAS 39: meaning of income statement and equity

Key definitions and terms: "income statement" and "equity"

Income statement

You will see references in the guidance that follows to amounts being taken to the income statement. "Income statement" is equivalent to "profit and loss account", and the terms are used interchangeably in this guidance. Both refer to the primary statement giving information about the company's performance.

Equity

Equity is the residual interest in the assets of the entity after deducting all liabilities. It is equivalent to "shareholders' funds", though under IAS it also includes “minority interest” (shortly to be known as “non-controlling interest”). IAS 1, the standard dealing with the presentation of financial statements, requires entities to present a statement of changes in equity (SCE) between two balance sheet dates. Where IAS 39 talks about amounts being taken to equity, they will be recognised in the SCE. It is equivalent to their being reflected in the STRGL (Statement of Total Recognised Gains and Losses), or taken to reserves.